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_______________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
-----
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
-----
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to __________________
Commission file number 1-483
MALLINCKRODT GROUP INC.
(Exact name of registrant as specified in its charter)
New York 36-1263901
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7733 Forsyth Boulevard
St. Louis, Missouri 63105-1820
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-854-5200
________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
--------------------- -----------------------
4% Cumulative Preferred Stock,
par value $100 per share New York Stock Exchange
Common Stock, par value $1 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
9 7/8% Sinking Fund Debentures
due March 15, 2011 New York Stock Exchange
6% Notes due October 15, 2003 New York Stock Exchange
7% Debentures due December 15, 2013 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
________________
Indicate by check mark whether the registrant (1)has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2)has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
________________
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $2,485,655,461 as of August 31, 1994. Market value is based on
the August 31, 1994, closing prices of Registrant's Common Stock and 4%
Cumulative Preferred Stock.
APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares
outstanding of each of the registrant's classes of common stock: 76,896,603
shares as of August 31, 1994.
DOCUMENTS INCORPORATED BY REFERENCE: Information required by Items 10, 11, 12,
and 13 of Part III is incorporated by reference from pages 3 through 14, pages
21 through 35, pages 11 and 12, and pages 9 through 11 and pages 13 and 14,
respectively, of the Registrant's definitive proxy statement for the annual
meeting of stockholders to be held on October 19, 1994.
____________________________________________________________________
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1994 FORM 10-K CONTENTS
Item Page
______________________________________________________________________________
Part I:
1. Business. 1
Introduction 1
General Factors Related To Business Segments 3
International Operations 3
Mallinckrodt Chemical 4
Mallinckrodt Medical 7
Mallinckrodt Veterinary 13
Other Activities 16
2. Properties. 19
3. Legal Proceedings. 20
4. Submission of Matters to a Vote of Security Holders. 22
Executive Officers of the Registrant 23
Part II:
5. Market for the Registrant's Common Stock and Related
Stockholder Matters. 25
6. Selected Financial Data. 26
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 27
8. Financial Statements and Supplementary Data. 33
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 51
Part III:
10. Directors and Executive Officers of the Registrant. 51
11. Executive Compensation. 51
12. Security Ownership of Certain Beneficial Owners and Management. 51
13. Certain Relationships and Related Transactions. 51
Part IV:
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 52
Signatures 66
_______________________________________________________________________________
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PART I.
ITEM 1. BUSINESS
INTRODUCTION
COMPANY PROFILE
Mallinckrodt Group Inc. (Mallinckrodt, the Company, or the Corporation) provides
human and animal health care products and specialty chemicals worldwide by means
of its three technology-based operating subsidiaries: Mallinckrodt Chemical,
Mallinckrodt Medical and Mallinckrodt Veterinary.
The Company was incorporated in New York in 1909 under the name International
Agricultural Corporation. The corporate headquarters is located at 7733
Forsyth Boulevard, St. Louis, Missouri 63105-1820, and the telephone number is
(314) 854-5200.
TRANSITION OF THE COMPANY
During the past several years, the Company has taken significant steps to
develop its current composition of businesses as follows:
- In February 1986, the Company, then called International Minerals &
Chemical Corporation, purchased Mallinckrodt, Inc. for $675 million
in cash.
- In October 1986, the Company sold its gas and oil segment and its
industrial products segment for $162 million.
- From March 1987 through July 1989, the Company expanded its animal
health business by acquiring Pitman-Moore, Inc., Coopers Animal
Health and the animal health business of Glaxo Holdings for an
aggregate $266 million in cash plus the assumption of certain
liabilities.
- In February 1988, IMC Fertilizer Group, Inc. (IFL), then a wholly
owned subsidiary, completed an initial public offering (IPO) of shares
of common stock. Until March of 1991, the Company owned 10 million
shares of IFL common stock, less than a majority voting interest in
IFL, and accounted for its investment in IFL by the equity method. In
September 1988, the Company's holdings of IFL's Preferred Stock,
Series A, were redeemed by IFL for $200 million.
- In June 1990, shareholders approved changing the Company's name from
International Minerals & Chemical Corporation to IMCERA Group Inc.
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- In March 1991, the Company entered into a sale and option agreement
with IFL under which IFL purchased, in three stages, all 10 million
shares of IFL common stock which the Company owned for total net
proceeds of $385 million. As of July 1991, the Company no longer
owned any IFL shares.
- In January 1992, Mallinckrodt, Inc., a wholly owned subsidiary of
IMCERA Group, Inc., divided its principal operations to form two
separate subsidiaries, Mallinckrodt Medical, Inc. and Mallinckrodt
Specialty Chemicals Company.
- In June 1993, the Company announced the details of a restructuring
program which resulted in a charge of $242 million after taxes, most
of which was for actions taken at Mallinckrodt Veterinary (then
called Pitman-Moore). Further discussion is included in the
Mallinckrodt Chemical and Mallinckrodt Veterinary business segment
discussions and Note 1 of Notes to Consolidated Financial Statements
(Notes).
- On March 15, 1994, shareholders approved changing the Company's name
from IMCERA Group Inc. to Mallinckrodt Group Inc. Simultaneous with
the corporate name change, Mallinckrodt Specialty Chemicals changed
its name to Mallinckrodt Chemical, Inc. and Pitman-Moore changed its
name to Mallinckrodt Veterinary, Inc.
- In March 1994, the Company moved its headquarters from Northbrook,
Illinois to St. Louis, Missouri.
- In June 1994, the Company announced the details of a restructuring
program which resulted in a charge of $59 million after taxes, most of
which relates to Mallinckrodt Medical. Further discussion is included
in the Mallinckrodt Medical and Mallinckrodt Veterinary business
segment discussions and Note 1 of the Notes.
Other recent acquisitions, divestitures and continuing investments in each of
Mallinckrodt's businesses are described in the discussions of the business
segments, Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7, and Note 1 of the Notes.
GENERAL POINTS
In this report:
Mallinckrodt Group Inc. and its subsidiaries, collectively, are called the
"Company," the "Corporation," or "Mallinckrodt," unless otherwise indicated by
the context. The Company has three business segments: Mallinckrodt Chemical,
Mallinckrodt Medical and Mallinckrodt Veterinary.
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The term "operating earnings" of a business segment represents that business
segment's revenues, including sales to other Mallinckrodt business segments,
less all operating expenses. Operating expenses of a business segment do not
include interest expense, corporate income or expense, and taxes on income.
All references to years are to fiscal years ended June 30 unless otherwise
stated.
Registered trademarks are indicated by an asterisk(*).
GENERAL FACTORS RELATED TO BUSINESS SEGMENTS
For a number of months, there have been extended discussions regarding the
enactment of federal legislation directed towards what is commonly referred to
as "health care reform." Numerous health care reform proposals have been
introduced in the U.S. Congress, and various states have also introduced or
enacted such reform measures. Mallinckrodt is unable to predict what effect
any such legislation, if enacted, might have on its businesses.
None of Mallinckrodt's business segments is dependent upon any single customer
or supplier or group of related or affiliated customers or suppliers whose loss
would have a material effect on its sales and operating results.
In general, Mallinckrodt's business segments, including related working capital
requirements, are not materially affected by seasonal factors.
Mallinckrodt's business segments do not extend long-term credit to customers.
The Company believes this non-extension of credit as well as its working capital
requirements are not materially different from the credit policies and working
capital requirements of its competitors.
Competition with foreign and domestic manufacturers and suppliers in
Mallinckrodt's business segments involves price, service, quality and the
development of technology. Competition is strong in all markets served.
Financial information about industry segments is included in Note 17 of the
Notes. Financial information about foreign and domestic operations and export
sales is included in Note 16 of the Notes.
INTERNATIONAL OPERATIONS
Foreign operations and investments are subject to risks customarily encountered
in such operations and investments. Risks include fluctuations in currency
exchange rates and controls, expropriation, and other economic, political, and
regulatory policies of local governments, as well as laws and policies of the
United States affecting foreign trade and investment.
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Mallinckrodt sales outside the U.S. represented about 35 percent of consolidated
net sales in 1994, 1993 and 1992. Products are manufactured and marketed
through a variety of subsidiaries, affiliates and joint ventures around the
world. See discussions of individual business segments included below; under
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 27-32; and in Note 17 of the Notes for additional
information.
MALLINCKRODT CHEMICAL
Mallinckrodt Chemical sales were:
<TABLE>
<CAPTION>
(in millions) Years ended June 30, 1994 1993 1992(1)
- --------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Ongoing operations
Pharmaceutical Specialties $ 225 $ 212 $ 183
Catalysts, Performance &
Lab Chemicals 212 183 185
----- ----- -----
437 395 368
Divested operations
and flavors business(2) 73
- ---------------------------------- ----- ----- -----
$ 437 $ 395 $ 441
----- ----- -----
----- ----- -----
<FN>
(1) Restated to reflect Chemical's reorganization effective July 1, 1992.
(2) Includes sales of the divested cosmetic and electronic chemicals businesses
and pre-joint venture sales of the flavors business.
</TABLE>
Mallinckrodt Chemical, Inc. and its subsidiaries, collectively are called
"Chemical," unless otherwise indicated by the context.
Chemical's products are sold to a variety of markets. These products possess a
higher degree of technology and service than is characteristic of commodity
chemicals. Generally, Chemical's products are sold as chemical intermediates
which are used by customers worldwide as components, ingredients or reagents,
rather than as final consumer products. Many of Chemical's products are
processed in multi-purpose manufacturing facilities. These products are also
often subject to government regulation and industry standards, including
FDA-mandated "Good Manufacturing Practice."
Chemical's products include drug chemicals, peptides, high-purity performance
chemicals, catalysts and laboratory chemicals. Through its 50 percent interest
in the Tastemaker joint venture, Chemical also participates in the flavors
business.
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PHARMACEUTICAL SPECIALTIES
Pharmaceutical specialties products include analgesics such as acetaminophen
(APAP) used to control pain and fever; codeine salts and other opium-based
narcotics and synthetic narcotics used to treat pain and cough; and peptides
which are used in many new pharmaceuticals. Other pharmaceutical specialties
products include narcotic/APAP combination products; Toleron* brand of ferrous
fumarate which stimulates the formation of red blood cells; various salts and
excipients; and Methodose* which is used for opiate addiction therapy and
analgesia.
Most pharmaceutical specialties products are sold to the pharmaceutical industry
for use in the manufacture of dosage-form drugs. Narcotic prescription
chemicals are also sold directly to drug wholesalers while opiate addiction
products are primarily sold to government clinics. All pharmaceutical
specialties are marketed by a direct sales force.
In 1992, Chemical began manufacturing peptides at its St. Louis facility, and
has performed appropriate facility construction and modification there in both
1994 and 1993. Peptides are also manufactured in Torrance, California.
In 1992, a $16 million project was begun to expand APAP manufacturing and
waste-treatment capacity at the Raleigh, North Carolina, facility. When
complete early in 1995, APAP capacity is expected to increase 25 percent
while lowering unit cost. The Derbyshire, England para-aminophenol (PAP,
a precursor of APAP) manufacturing plant is running at double its former
capacity following an expansion there in 1992. In 1993, Chemical acquired
Contech Laboratories, a facility located in Greenville, Illinois which had
performed certain processing steps relating to the manufacture of Compap*
and other products. Chemical has expanded these facilities to manufacture
and process additional products and forms. In 1992, work also began on an
approximately $9 million project to expand and upgrade the narcotics facility
in St. Louis, Missouri, which is expected to be completed early in 1995.
CATALYSTS, PERFORMANCE & LAB CHEMICALS
Catalysts, produced in Erie, Pennsylvania, are sold to the petrochemical and
food industries. They include such products as platinum and palladium on carbon
or alumina substrates; copper chromite; tableted, flaked and droplet shapes of
nickel catalysts; and a variety of custom catalysts. Such catalysts are used to
manufacture plasticizers, detergents, rubber products, insecticides, synthetic
motor oil and edible fats and oils. Catalysts are marketed directly by
Chemical under the registered trademark Calsicat.
In 1994, Chemical acquired Catalyst Resources, Inc., a manufacturer of
polymerization catalysts based in Pasadena, Texas. Catalyst Resources produces
custom and proprietary catalysts for manufacturers of
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polypropylene and polyethylene. Catalyst Resource products are marketed by a
direct sales force, with a large percentage of sales to international customers.
High-purity performance chemicals sold to industrial consumers include such
products as calcium stearates and other metal soaps for use as internal
lubricants to facilitate the manufacture of molded and extruded plastics;
high performance monomers and several plastic additives and customized additive
blends for use as processing aids in the production of polymers; and potassium
chloride for use as a "salt substitute" in low-sodium diets. Chemical sells
these products through distributors and its sales force.
Laboratory chemical products include high-purity reagent chemicals used in
research and development and analytical laboratories. These high-purity
products consist of hundreds of reagent chemicals sold through distributors and
a direct sales force to medical, industrial, educational and governmental
laboratories. Laboratory chemicals are manufactured in Paris, Kentucky.
JOINT VENTURE
In February 1992, a 50/50 joint venture partnership was formed with Hercules
Incorporated to manufacture and market flavor products. The venture, named
Tastemaker, was created by combining Chemical's Fries & Fries flavors
business with Hercules' PFW Flavors and Citrus Specialties businesses.
Tastemaker is headquartered in Cincinnati, Ohio, and has a major presence in the
world's three largest flavors markets -- Europe, North America and Asia/Pacific.
It manufactures products for use in convenience foods and beverages; dry and
liquid beverage mixes; cordials, cocktails and wines; ice cream, cheese and
other dairy products; cake and cookie mixes, snacks and other bakery products;
main meals and entrees; and pharmaceutical products. Production and distribution
of these products are subject to regulation by various country agencies.
Tastemaker manufacturing facilities are located in Barneveld, Netherlands;
Cincinnati, Ohio; Mexico City, Mexico; Milton Keynes, United Kingdom; Sydney,
Australia; and Lakeland, Florida. Distribution is primarily through direct
sales forces and distributors.
OTHER
During the last three years, Chemical has made several major changes in its
business in addition to the changes discussed above. It combined its science
products and performance chemicals businesses and consolidated its European
operations under its Catalysts, Performance and Lab Chemicals Group as part of
a 1992 reorganization. In 1992, Chemical divested its cosmetic and electronic
chemicals businesses and
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exited a general-line chemical business. In 1993, the European operations were
realigned between the Pharmaceutical Specialties and Catalysts, Performance and
Lab Chemicals Groups along product lines.
The restructuring program begun in 1993 is producing anticipated results with
the exit of the aromatic flourial intermediates business substantially competed
in 1994 and the exit of the photochemicals business expected to be substantially
completed in 1995. In the interim, the company continues to operate its
Dieburg, Germany photochemical manufacturing facility.
MALLINCKRODT MEDICAL
Mallinckrodt Medical sales were:
<TABLE>
<CAPTION>
(in millions) Years ended June 30, 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Radiology & Cardiology $ 436 $ 382 $ 294
Nuclear Medicine 186 182 160
Anesthesiology & Critical Care 290 219 166
- -------------------------------- ----- ----- -----
$ 912 $ 783 $ 620
----- ----- -----
----- ----- -----
</TABLE>
Mallinckrodt Medical, Inc. and its subsidiaries, collectively are called
"Medical," unless otherwise indicated by the context.
Medical products are instrumental in the delivery of health care services and
are sold to hospitals, clinical laboratories and other customers on a worldwide
basis. They are related by a high degree of innovation and technology, by
regulation from agencies such as the U.S. Food and Drug Administration (FDA)
and by markets served. They are significantly affected by conditions within
the health care industry, including continuing legislative initiatives and
public and private health care insurance and reimbursement programs. An aging
population and demand for technologically superior products to improve the
quality of life and lower the cost of care are two major factors fueling
growth within the industry.
Medical provides advanced, innovative products for radiology, cardiology,
nuclear medicine, anesthesiology and critical care. Principal products of this
industry segment are contrast media for various imaging modalities,
radiopharmaceuticals for medical diagnostic procedures, and disposable medical
devices and instruments and systems for use in surgical procedures, critical
care and alternate site facilities.
During 1994, Medical conducted studies to develop strategies to effectively
respond to customer needs and compete in a market that is
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changing rapidly as the result of health care reform. As a result of these
efforts, in the fourth quarter Medical announced a pre-tax charge of $74
million related to the reengineering process.
The key components of the charge include the reorganization of the current
medical specialty oriented U.S. sales structure into a unified sales
organization divided into geographical districts; reorganization to reduce,
centralize and standardize certain non-sales related functions and management
processes; relocation of the Argyle, New York tracheal tube manufacturing
operations to existing plants in Athlone, Ireland and Irvine, California, and a
new facility to be built in Juarez, Mexico; and severance costs related to an
associated work-force reduction.
The process of restructuring the U.S. sales force addresses new alliances being
created on a market-by-market basis and the changing dynamics of existing
customers' decision-making processes. Medical has begun the process of
consolidating its five divisional sales units into one team that reports through
a senior vice president to the chief executive officer, thereby increasing
responsiveness by reducing levels of authority. The consolidation also creates
12 geographic regions to improve planning and strategy development on a local
basis. And while it will continue to emphasize contact with the clinical
community within its customer base, the new sales structure will create a single
point of contact with each purchasing entity, providing quicker, more efficient
and effective customer service.
Pre-tax cash expenditures for this restructuring should approximate $65 million,
consisting of $28 million for severance costs for about 500 people at various
locations around the world, $15 million for consulting, $13 million for
manufacturing rationalization and $9 million for other items. Approximately $50
million of the expenditures will occur in 1995. The non-cash pre-tax portion of
the charge should approximate $9 million, primarily relating to manufacturing
rationalization. An additional $34 million of capital spending will be incurred
relating to information systems and manufacturing rationalization. The majority
of actions under this program are expected to be completed in one year. Annual
pre-tax savings from the restructuring will be approximately $40 million, with
partial benefit in 1995 and most of the savings achieved in 1996.
The restructuring should allow Medical to remain flexible to address future
change, reduce costs, remain competitive and sustain a strong market presence.
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RADIOLOGY & CARDIOLOGY
Radiology products include iodinated contrast media (ionic and nonionic) and
catheters for use in studies of the brain, abdominal organs, renal system,
peripheral vascular system and other areas of the body to aid in diagnosis and
therapy. In 1994, these products were marketed principally by a divisional
direct sales force, which will be consolidated within the geographically
organized sales force pursuant to Medical's restructuring. Since its
introduction in the U.S. five years ago, Optiray*, a low osmolar, nonionic
medium, has been widely accepted in both radiology and cardiology indications.
Optiray* began to be introduced outside the U.S. in 1991. To source growing
Optiray* volumes in the international market, the company opened a new
production facility in Dublin, Ireland during the year, for the manufacture of
Optiray* in its bulk drug form. In addition, a capacity expansion at
Medical's existing plant in St. Louis, Missouri has been completed. In June
1990, Medical introduced Ultraject*, a patented innovation in
contrast media agent administration. This prefilled syringe provides
radiologists a more efficient, convenient and safer method of delivering
contrast agents. Ultraject* continues to fuel the growth of Optiray* in the
imaging market as it provides a significant market edge over traditional glass
syringes because it reduces the potential for both dosage error and handling
hazards.
The cardiology business is directed toward meeting the needs of both invasive
and non-invasive cardiologists in diagnosing and treating diseases of the heart
and the cardiovascular system. The business currently offers both ionic and
nonionic contrast agents, and interventional catheters and related supplies.
These products are sold directly to hospitals, primarily by a dedicated sales
force which will be consolidated within Medical's new geographically
organized sales force. During 1989, Medical acquired an equity
position (since unchanged) of less than two percent of the then currently
outstanding common shares of Molecular Biosystems, Inc. of San Diego,
California, and obtained exclusive marketing rights in the Western
Hemisphere for Albunex*, a new ultrasound contrast agent. Albunex*
was unanimously recommended for approval by the Radiology Device Advisory
Panel of the FDA in July 1992. Molecular Biosystems received an approvable
letter for Albunex* from the FDA in April 1994. Final approval was received
early in August 1994 with Medical's launch of the product anticipated in the
second quarter of 1995.
During 1993, Medical reached an agreement with Peripheral Systems Group
("PSG"), a division of Eli Lilly and Company, to obtain exclusive, worldwide
distribution rights for a broad line of interventional radiology and cardiology
products manufactured by PSG. Medical started North American distribution
in 1993 and began full distribution in Europe, Japan and Latin America in the
third quarter of 1994.
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Medical's largest developmental effort in this area is directed toward
contrast agents for magnetic resonance imaging, primarily in neurology, oncology
and cardiovascular applications.
At June 30, 1994, radiology and cardiology manufacturing facilities were located
in Angleton, Texas; Raleigh, North Carolina; St. Louis, Missouri; Quebec,
Canada; Mulhuddart, Ireland; and Mexico City, Mexico.
NUCLEAR MEDICINE
The nuclear medicine business consists of radiopharmaceuticals used to provide
images of numerous body organs' anatomy and function, and to diagnose and treat
diseases. Nuclear medicine products are sold to hospitals and clinics in the
U.S. by both a direct sales force, which will be consolidated within
Medical's geographically organized sales force, and through a nationwide network
of nuclear pharmacies. Internationally, marketing will continue through direct
sales forces and distributors. Health physics consulting services are also
provided to hospitals.
In June 1994, the FDA authorized U.S. marketing of OctreoScan*. This unique
radiopharmaceutical will assist physicians in diagnosing and determining the
extent of spread in certain types of cancers, using a non-invasive procedure
instead of surgical biopsy. OctreoScan* will be manufactured at facilities
in St. Louis, Missouri and Petten, Netherlands. Introduction of the product
began in June 1994 through key hospitals specializing in cancer treatment.
Marketing of the product has been expanded upon FDA approval of promotional
material.
In 1990, Medical introduced TechneScan* MAG3* for improved imaging
of the kidneys and the renal system. Unlike a standard x-ray based imaging
procedure, a nuclear medicine scan utilizing MAG3* can accurately assess renal
tubular function in addition to providing anatomical information. In 1991, the
company introduced the highly successful UltraTag* RBC blood pool imaging kit
which is used for gated blood pool, "first pass" cardiac studies, and for the
detection of hemangiomas and gastrointestinal bleeding sites. In order to meet
growing worldwide demand for cyclotron-produced products, Medical is
currently expanding cyclotron capacity at its radiopharmaceutical production
facility in Maryland Heights, Missouri. Medical also brought a new
cyclotron on-line at Petten, Netherlands, in 1993. Medical is also
expanding the Maryland Heights, Missouri manufacturing facility to
introduce an improved generator product.
Additionally, during 1992, Medical signed an agreement with the Netherlands
Energy Research Foundation to construct a plant in Petten
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dedicated to the manufacture of molybdenum-99 (Mo99), a key raw material used in
the production of the nuclear medicine imaging product technetium-99m. Full
production is expected to begin by the end of 1995.
Current research efforts in this area are directed to development of compounds
to alleviate cancer-related bone pain, detect several types of cancer, and
evaluate heart disease.
At June 30, 1994, nuclear medicine manufacturing facilities were located in
Maryland Heights, Missouri and Petten, Netherlands. Medical owns these
facilities. The company also operates 33 nuclear pharmacies located in
population centers throughout the U.S.
ANESTHESIOLOGY & CRITICAL CARE
Anesthesiology products include continuous core temperature monitoring systems;
convective warm air temperature management systems; tracheal tubes, tracheostomy
tubes, breathing systems, and other disposables; and airway management products.
Continuous core temperature monitoring and temperature management systems are
utilized both in surgical procedures and postoperatively. In 1993, Medical
expanded its airway management product line by acquiring the tracheostomy
products business of Sorin Biomedical in Irvine, California. The airway
management product line consists of basic and specialty tracheal tubes used in
hospitals for maintaining a secure airway during anesthesia and intensive care
and tracheostomy tubes which are used in hospitals and alternate site facilities
for maintaining airways during respiratory care. Anesthesiology products are
marketed directly and through distributors in the U.S. The direct sales force
will be consolidated within Medical's new geographically organized sales
force. Internationally, airway and temperature systems are marketed directly
and through distributors.
In 1994, Medical acquired DAR S.p.A. of Mirandola, Italy to complement its
tracheal and tracheostomy tube business and expand the core airway management
business into related anesthesia and respiratory disposables. DAR products
include disposable filters, heat/moisture exchanges, masks and breathing
circuits used in operating rooms and intensive care units to provide respiratory
support to critically ill patients. Current distribution channels will be
changing to support DAR products worldwide market potential. In 1994, Juarez,
Mexico became the new production base for the temperature monitoring systems
products used in emergency and critical care settings. Medical is
capitalizing on the rapid conversion to disposable tracheal tubes in Europe by
expanding its anesthesiology products plant in Athlone, Ireland. Also, as
previously discussed, a portion of the Argyle, New York tracheal tube
manufacturing operations will be relocated to a new facility to be built in
Juarez, Mexico.
In critical care, Medical provides instruments and systems to
analyze blood gases and electrolytes, and systems for blood hemoglobin and
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glucose analysis. GEM*-STAT is designed for use in low-volume intensive care
units, while GEM*-6 provides testing in the operating room, primarily for
cardiovascular surgery. The GEM* Premier is a user friendly product which has a
high capacity and is more cost-effective than competing whole-blood analyzers.
The GEM* Premier is utilized in intensive care units as well as in hospital stat
and central laboratories. These products are sold directly to hospitals in the
U.S. and through direct sales forces and distributors in international markets.
During 1993, Medical acquired the HemoCue businesses, HemoCue A.B. of
Angelholm, Sweden and HemoCue Inc. of Mission Viejo, California, to complement
the GEM system's point of care blood analysis product line. HemoCue products
include blood hemoglobin and glucose analysis systems for use in hospitals and
alternate site markets. These products are distributed directly and through
distributors in the U.S. and internationally. The U.S. direct sales force will
be consolidated within Medical's new geographically organized sales force.
At June 30, 1994, anesthesiology and critical care manufacturing facilities
were located in Carlsbad, California; Santa Ana, California; Argyle, New York;
Irvine, California; Ann Arbor, Michigan; Vitrolles, France; Athlone, Ireland;
Mirandola, Italy; Juarez, Mexico; and Angelholm, Sweden. Medical owns the
Argyle, Athlone and Mirandola facilities. The remainder are leased.
At June 30, 1994, the company had distribution locations in Mission Viejo,
California; Victoria, Australia; Vienna, Austria; Bruxelles, Belgium;
Quebec, Canada; Evry Cedex, France; Gemenos, France; Hennef, Germany; Tokyo,
Japan; Mexico City, Mexico; Petten, Netherlands; Athlone, Ireland; Catano,
Puerto Rico; Madrid, Spain; Zurich, Switzerland; Northampton, United Kingdom;
Milan, Italy; and Singapore. Medical owns the facilities in Athlone,
Quebec, Mexico City and Petten. The remainder are leased.
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MALLINCKRODT VETERINARY
Veterinary sales were:
<TABLE>
<CAPTION>
(in millions) Years ended June 30, 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Pharmaceuticals $ 249 $ 258 $ 285
Biologicals 95 105 104
Feed Ingredients 162 169 172
Veterinary Specialties & Other 86 86 81
- -------------------------------- ----- ----- -----
$ 592 $ 618 $ 642
----- ----- -----
----- ----- -----
</TABLE>
Mallinckrodt Veterinary, Inc. and its subsidiaries, collectively are called
"Veterinary," unless otherwise indicated by the context.
Veterinary initiated the restructure of its global operations
during 1993 to improve operating earnings and growth potential by strengthening
its global distribution and marketing capabilities and consolidating
manufacturing facilities to improve worldwide product sourcing and increase
plant utilization.
To date, approximately 1,000 positions have been eliminated, nearly 500 of which
were eliminated during 1994; 10 manufacturing facilities have been closed; more
than 200 low margin products have been dropped from the lines offered by the
company; commercial and administrative functions have been streamlined,
including the consolidation of most of the research and development operations
to one global facility located near the corporate headquarters; and Veterinary
has exited non-core businesses and high risk development projects that have
diminished in potential, including a project for the development of a porcine
somatotropin (PST) product under the name Grolene*.
Veterinary ranks in the top five companies in the animal health
industry worldwide in terms of sales, and continues to have direct presence in
the top 25 animal health markets of the world, with more than half its net sales
originating outside the U.S. Veterinary focuses on four strategic segments, or
two-thirds, of the $12 billion market for animal health products;
pharmaceuticals, biologicals, veterinary specialties and feed ingredients.
Veterinary's operations support a product line approaching 1,000 products. Its
strategy calls for selective additions of new products and for geographic
expansion into new markets. Specifically, it intends to focus on improving its
leading positions in North America, the United Kingdom, Australia, New Zealand
and Brazil, and to increase market share in Germany, France, Japan, Mexico and
Spain. Veterinary also sees growth potential in less developed nations such as
China.
Veterinary continues to focus its efforts on product areas
13
<PAGE>
that offer the greatest opportunities. Consequently, Veterinary
expects to continue to derive most of its sales and profit from the food animal
sector, while selectively developing product lines in the companion animal
market, and through specialty distribution. In the worldwide animal health
industry, products for food animals comprise nearly 80 percent of the market.
Approximately 85 percent of Veterinary's revenues are from products used for
food animals.
Cross registration, or filing for approval of products already marketed in other
countries, is a key component of Veterinary's geographic expansion
efforts. Approximately 350 product approvals have resulted from cross-
registration through 1994, with additional approvals expected over the next
three to five years.
Operations are currently located in more than 30 countries, with distribution
networks in more than 100 nations. Veterinary's organizational structure
(three geographic regions and the Feed Ingredient business) is aligned for
increased market focus and customer responsiveness and enables it to
sell directly to the consumer, veterinarian, distributor, dealer or agent,
depending on the maximum market opportunity.
PHARMACEUTICALS
The pharmaceutical business segment includes productivity enhancers,
ectoparasiticides, and antimicrobials.
The worldwide market for productivity enhancers is $200 million. Veterinary's
strategy is to strengthen its position through product line extensions.
Ralgro*, Veterinary's long-established and consistent performer, is
the leading growth promotant for cattle on grass in the U.S. The product is
also marketed in a number of Latin American and other countries. Ralgro
received U.S. Food and Drug Administration approval in 1994 for use in heifer
calves intended for reproduction. This expanded applicability is expected to
help simplify the implant process for beef producers.
The world market for parasiticides is $2 billion. Veterinary is one of the
leading companies in this market, and offers a wide range of food animal
products such as pour-ons, sprays and eartags.
Defend* EXspot*, a topical flea control product for dogs that also protects
against deer ticks (carriers of organisms that cause Lyme disease), is marketed
in the U.S. and many countries throughout the world with recent approvals and
launches in France and Norway.
14
<PAGE>
Veterinary participates extensively in the $1.9 billion global
antimicrobial market, which includes antibacterial and antifungals. Its
strategy calls for investment to maintain and selectively expand its presence.
A broad-spectrum antibacterial sold under the brand names Zaquilan* and
Diprinovet* was introduced in 1993, primarily in the United Kingdom, Ireland
and Scandinavia for food and companion animals. It continues to gain customer
acceptance while awaiting regulatory approvals in the remainder of Europe.
Other products include Cepravin*, an intramammary antibiotic for dairy cattle;
Butalex*, a unique treatment for theilerosis in cattle; and Clinafarm*, an
antifungal for poultry hatcheries.
At June 30, 1994, pharmaceutical manufacturing facilities were located in Baton
Rouge, Louisiana; Terre Haute, Indiana; Bray, Ireland; Friesoythe, Germany;
Cali, Columbia; Kuala Lumpur, Malaysia; and Manila, Philippines.
BIOLOGICALS
Veterinary's strategic plan has identified biologicals as the
primary focus of its development efforts, and it already has a leading
position in this market. Biologicals, which include primarily vaccines,
represents a current world market of $1.8 billion that is growing at an annual
rate of about five to eight percent, making it the fastest growing segment of
the animal health industry.
In 1994, Veterinary committed to a biological production facility
to be built in Raleigh, North Carolina. The $31 million, 63,000 square-foot
plant is expected to begin commercial production in 1997 and will produce
livestock and companion animal vaccines for distribution around the world.
Veterinary has two other global biological production facilities, in Upper Hutt,
New Zealand, and Burgwedel, Germany, which were completed in 1992 at a total
cost of $37 million. These three plants are expected to allow Veterinary to
maintain a competitive position in this industry segment as well as aid in the
development of new global vaccines and innovative delivery systems.
Veterinary entered into a global technology and product exchange
agreement with Boehringer Ingelheim Animal Health, Inc., St. Joseph, Missouri,
in August, 1994. The agreement provides for Veterinary to immediately begin
marketing and distributing certain Boehringer Ingelheim cattle respiratory
vaccines in the United States under the Strategy* brand name. The agreement
also provides Veterinary with respiratory vaccine antigens and
technology which are expected to enable it to develop second-generation
vaccines with enhanced duration, effectiveness and safety.
Among Veterinary's vaccines are Coopervax*, a vaccine for the prevention of
foot and mouth disease in cattle and sheep; Coccivac* and Paracox*, leading
vaccines that prevent poultry coccidiosis by stimulating the immune
15
<PAGE>
system; Cattlevax*, a combined leptospirosis/clostridial vaccine for cattle; and
Footvax*-M vaccine for control of foot rot in sheep. Paracox* is marketed
primarily in Europe, and Coccivac* primarily in the Americas and Asia. Both
vaccines are pending approval in other countries.
Other biological manufacturing facilities at June 30, 1994 were locatd in
Compton, United Kingdom; Sao Paulo, Brazil; Linque, Paraguay; and Millsboro,
Delaware.
VETERINARY SPECIALTIES AND OTHER
In the $1.1 billion worldwide veterinary specialties market,
Veterinary is a leading supplier of prostaglandins, anesthetics and surgical
products.
Extensive use of Veterinary's product distribution capabilities by
companies such as Johnson & Johnson and Zeneca strengthens Veterinary's
position in this market.
Veterinary also participates in the $535 million anticoccidial
market with the product Clinacox*, an anticoccidial for chickens and turkeys.
Clinacox* is marketed in Canada and Latin America and is awaiting regulatory
approval in the U.S.
FEED INGREDIENTS
Participating in a $1 billion worldwide market, Feed Ingredients contributes
more than 25 percent of Veterinary's total sales. Veterinary has
a strong brand position in this market with feed supplements such as Monofos*,
Biofos*, Dynafos*, Multifos*, Dyna-K* and Dynamate*.
Veterinary owns a feed phosphate plant adjacent to the phosphate
chemical complex of IMC Fertilizer Group, Inc. (IFL) in New Wales, Florida.
Under an agreement which expires in 1997, IFL operates the Veterinary plant.
Veterinary also contracts with IFL for key raw materials including phosphoric
acid and phosphate rock. IFL also supplies Veterinary's requirements of
animal feed-grade potassium products. Veterinary believes there are adequate
sources of supply from other producers in the event these supply agreements are
not renewed.
OTHER ACTIVITIES
RESEARCH AND DEVELOPMENT
The Company performs applied research directed at development of new products,
development of new uses for existing products, and improvement of existing
products and processes. Research and development programs
16
<PAGE>
include laboratory research as well as product development and application.
Mallinckrodt Chemical research and development efforts are organized within its
operating divisions to focus technical resources on the development of new and
improved products meeting defined market and customer needs. Technical
personnel for process support are located at each manufacturing location.
Internal research effort is supplemented with third-party and university
technical agreements.
Mallinckrodt Medical research and development efforts are coordinated on a
worldwide basis by a senior scientist. Research and development of imaging and
therapeutic products are carried on by a centralized organization. Research and
development for anesthesia and critical care are performed within these
businesses. Mallinckrodt Medical's various development activities are focused
on market-place needs. Internal research effort is supplemented with third-
party and university technical agreements.
Mallinckrodt Veterinary currently has many products under development that
address the needs of world and regional markets. The company consolidated its
primary research and development capabilities at a single site in the Chicago,
Illinois area in 1993, in conjunction with the restructuring of its businesses.
Products in development include vaccines, growth enhancers and parasiticides for
livestock, poultry and companion animals. To supplement its own research,
Mallinckrodt Veterinary has technical agreements with various pharmaceutical and
biotechnology companies and universities.
PATENTS, TRADEMARKS, AND LICENSES
Mallinckrodt owns a number of patents and trademarks, has a substantial number
of patent applications pending, and is licensed under patents owned by others.
No single patent is considered to be essential to the businesses as a whole, but
in the aggregate, the patents are of material importance to the Company's
business.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
The Company is subject to various environmental protection and occupational
safety and health laws and regulations in the United States and foreign
countries in which it operates. In addition, in its operations, currently and
over the years, the Company has handled, and will continue to deal in or
otherwise handle, materials and wastes classified as hazardous or toxic by one
or more regulatory agencies. The Company is also subject to the Federal Food,
Drug, and Cosmetic Act, other federal statutes and
17
<PAGE>
regulations, various state statutes and regulations, and laws and regulations of
foreign governments, affecting and involving testing, approval, production,
labeling, distribution, post-market surveillance and advertising of most of the
Company's existing, new, and prospective products.
Significant capital expenditures, as well as operating costs, have been incurred
on account of the laws and regulations governing the protection of the
environment, occupational safety and health, and the handling of hazardous
materials. There are inherent and unquantifiable risks in mishandling, or
potential accidents involving, hazardous or toxic materials and wastes. On the
basis of its best information and belief, the Company does not believe the
expenditures and risks occasioned by these circumstances have as yet become
materially adverse to its operations or financial condition taken as a whole;
however, no assurance can be given that this will continue to be true.
Similarly, the interpretation and enforcement of the laws and regulations
pertaining to the Company's products or facilities by government agencies, such
as the U.S. Food and Drug Administration and the U.S. Environmental Protection
Agency, and state and foreign counterparts, at any particular production site or
in connection with any particular product or any proposed new or modified
product, may be more strict than anticipated, and could result in production
interruption and product holds or recalls.
The Company endeavors to comply with all of these laws and regulations, as well
as with all other applicable laws and regulations, but there can be no assurance
compliance will always be achieved. Instances of non-compliance have occurred
in the past and although they have not had a material adverse impact on the
Company, such instances could occur in the future and possibly have a material
adverse impact.
In particular, the Company is unable to predict the extent to which it may be
adversely affected by future regulatory developments such as new or changed laws
or regulations.
Most of the Company's environmental related capital expenditures are in response
to provisions of the Federal Clean Air Act, Water Pollution Control Act,
Resource Conservation and Recovery Act, Comprehensive Environmental Response,
Compensation, and Liability Act, land use, air, and water protection regulations
of the various localities and states, and their foreign counterparts. Capital
expenditures worldwide relating to air emission control, wastewater
purification, land reclamation and solid waste disposal totaled approximately
$15 million in 1994 and $20 million in 1993. The Company currently estimates
that environmental capital expenditures
18
<PAGE>
over the next two years will average about $25 million per year.
Environmental clean up costs are often incurred over extended periods of time.
Nevertheless, to the extent these costs can be reasonably estimated, and the
Company's responsibility is probable, accruals are established although the
costs are not yet payable, and are reflected in the Company's consolidated
financial statements.
See also Item 3., Legal Proceedings, and Note 19 of the Notes for additional
information.
EMPLOYEES
Mallinckrodt had 10,200 employees at June 30, 1994, consisting of 6,100 U.S.
based employees and 4,100 employees outside the U.S. Employees by business
segment are: Mallinckrodt Chemical, 2,435; Mallinckrodt Medical, 5,200; and
Mallinckrodt Veterinary, 2,500. Sixty-five employees are engaged in corporate
activities.
LABOR RELATIONS
In the U.S., the Company has eight collective bargaining agreements with eight
U.S. international unions or their affiliated locals covering 650 employees.
Five agreements covering 495 employees were negotiated during 1994, all with no
work stoppages. No agreements will expire in 1994. Eleven Mallinckrodt Medical
and Mallinckrodt Chemical operating locations outside the U.S. have collective
bargaining agreements and/or work counsel agreements covering approximately
1,055 employees. Mallinckrodt Veterinary operating locations outside the U.S.
have eight collective bargaining agreements and/or work counsel agreements
covering approximately 313 employees. Recent wage and benefit increases were
consistent with competitive industry and community patterns.
ITEM 2. PROPERTIES
Information regarding the principal plant and properties of Mallinckrodt is
included in the respective business segment discussions in Item 1., Business.
Additionally, at June 30, 1994 Mallinckrodt Medical and Mallinckrodt Veterinary
occupy office and laboratory space owned by those companies in St. Louis,
Missouri and Mundelein, Illinois, respectively. Mallinckrodt Chemical and
Mallinckrodt Group lease office space in St. Louis, Missouri.
19
<PAGE>
The Company believes its manufacturing and distribution facilities at June 30,
1994 are adequate, suitable and of sufficient capacity to support its current
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a number of legal proceedings in which liabilities
are sought to be imposed on it. The Company believes that the currently pending
matters, which are largely related to federal, state, and local environmental
and pollution control statutes, and which in most cases relate to discontinued
operations of the Company, will not have a material adverse effect on its
financial condition or the results of the Company's operations. Those matters
required by Securities and Exchange Commission rules to be reported here or that
could be regarded as potentially material are as follows:
ENVIRONMENTAL MATTERS
Auburn Hills, Michigan -- As first reported in 1986, the Company was named
as a defendant in two cases brought by the State of Michigan in the United
States District Court in Detroit, Michigan in 1986, involving a drum recycling
facility in Auburn Hills, Michigan. The City of Pontiac has also intervened as
an additional plaintiff. The Company has filed a third-party complaint against
approximately 110 parties that sent drums to the recycling facility, seeking
contribution for damages that might be assessed against the Company. The court
has not held any hearings concerning this case since Spring 1987 and has stayed
all third-party proceedings. A settlement in principle reached in 1991 by the
Company with the State was not finalized. The State has entered into a
Consent Order with some 40 de minimis Potentially Responsible Parties (PRP's),
resolving their liability for the site. The State has completed its Remedial
Investigation and Feasibility Study for the site and after the study is made
available for public comment, the State will indicate its remedy for the site.
Until the State selects its preferred remedy, it is not possible to estimate
the cleanup costs for the site.
Ashtabula County, Ohio -- As first reported in 1985, this matter involves a
claim by the United States Environmental Protection Agency ("EPA") against the
Company and other companies concerning the alleged pollution of a stream near
Ashtabula, Ohio, designated as "Fields Brook," where the Company once operated
a plant. The Company and several other companies have settled the litigation
brought by EPA and all of the companies have agreed to nonbinding arbitration of
the allocation of payment for a Remedial Design/Remedial Action study ordered by
EPA. This arbitration and proceedings to add third parties as defendants are in
process and the arbitrator's decision is expected in October 1994. Although the
Company's allocable share of cleanup costs cannot be determined at this time,
the Company continues to believe this proceeding will not have a material
adverse effect on its financial position or results of operations.
20
<PAGE>
Orrington, Maine -- As first reported in 1989, Hanlin Group, Inc. filed a
complaint in the United States District Court for the District of Maine against
the Company in April 1989 relating to a chemical manufacturing facility located
in Orrington, Maine that was purchased from the Company. Hanlin alleged that
the Company operated the facility in violation of state and federal
environmental laws and that the Company illegally caused carbon tetrachloride
and chloroform contamination at the facility. As previously reported, the
Company and Hanlin settled the claims relating to the Orrington plant in 1991.
The facility has since been sold to Holtrachem Manufacturing Company, L.L.C.,
with the settlement agreement assigned to them as part of the sale. Pursuant to
the terms of the settlement, the Company is to pay specified costs of a study
ordered by the EPA. Following the completion of all required studies, the
parties will attempt to reach an agreement concerning the sharing of costs or
remediation; if they cannot reach agreement, the matter will be referred to
binding arbitration. The Company is not able to estimate its exposure for all
study and cleanup costs at this time.
Allentown, Pennsylvania -- In September 1993, the Whitehall Township Authority
("WTA") asserted claims against Trimet Technical Products, Inc., a subsidiary of
the Company, alleging that Trimet's facility in Allentown, Pennsylvania had
contaminated one of the WTA water supply wells. WTA has purchased water from a
neighboring system to replace water from the contaminated well, which has been
closed since November 1990. From November 1990 through December 1992, Trimet
reimbursed WTA for the cost of purchasing alternative water supplies based on
the average pumping rate for the contaminated well in the year before it was
closed. From January 1993 through present, Trimet has reimbursed WTA for its
actual water purchases. Trimet is also conducting remediation efforts to remove
the contamination from the aquifer. WTA claims that Trimet should reimburse it
for: the construction costs of a new well (approximately $250,000); $650,000 in
water supply replacement costs over and above reimbursements already made; and
approximately $250,000 for professional services. Based upon information
available at this time, it is not possible to determine Trimet's potential
liability for these claims.
OTHER MATTERS
The Corporation, Mr. Kennedy, Mr. Bentele, and two former officers no longer
with the Corporation are named as defendants in two purported class actions
brought in February 1992 by two alleged stockholders. These actions, which have
been consolidated and are now pending in the United States District Court for
the Southern District of New York, allege violations of federal securities laws
and related state laws. The plaintiffs base their allegations principally on
the Corporation's February 18, 1992, press release about an FDA inspection of
Mallinckrodt Veterinary's Kansas City plant that also cautioned that estimates
of
21
<PAGE>
security analysts regarding fiscal 1992 earnings from continuing operations in
excess of $1.65 per share "were probably too optimistic." The estimates had
been marginally higher, $1.67 per share. The thrust of the allegations is that
disclosure of manufacturing deficiencies was not made on a timely basis. On
October 4, 1993, the district court granted defendants' motion to dismiss the
complaint without leave to replead. Plaintiffs thereafter moved to reopen the
judgment and for leave to file an amended pleading, which motion was denied.
Plaintiffs have appealed both decisions and the appeal has been briefed and is
awaiting argument.
In September 1992, a stockholder's derivative suit was filed in the United
States District Court for the Southern District of New York, purportedly on
behalf of the Corporation, against all of the then directors of the Corporation
asserting claims for alleged violation of the federal proxy rules, for alleged
breach of fiduciary duty, and in Mr. Kennedy's case for alleged misappropriation
of confidential business information. The case was assigned to the same judge
as the above class actions and was consolidated with them for pre-trial
purposes. This case, like the class actions, arose as a consequence of the FDA
inspection and the February 18, 1992 press release referred to above in the
class actions. On October 4, 1993, the district court granted defendants'
motion to dismiss the complaint for, among other things, failure to make a
demand on the Board before commencing suit. Plaintiff did not appeal this
decision. Rather, plaintiff's counsel served a purported demand letter on the
Board requesting that appropriate action be taken to redress the alleged
misconduct that was the subject of plaintiff's prior complaint. By letter dated
December 7, 1993, the Corporation requested further information from plaintiff
regarding the allegations in the demand letter, but to date has not received any
response to this request.
The Corporation believes the aforementioned suits are without merit and will
have no material adverse effect on its financial position or results of
operations.
Other previously reported legal proceedings have been settled or the issues
sufficiently resolved so as to not merit further reporting.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended
June 30, 1994.
22
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The ages and five-year employment histories of Mallinckrodt's executive officers
at June 30, 1994, were as follows:
C. R. (RAY) HOLMAN
Age 51. President and Chief Executive Officer since December 1992; Vice
President from October 1990 to December 1992; President and Chief Executive
Officer, Mallinckrodt Medical, Inc., from January 1989 until December 1992;
Group Vice President of the Medical Products Group, Mallinckrodt Inc., from
September 1985 to January 1989.
WILLIAM J. MERCER
Age 46. Senior Vice President since October 1993; Vice President from December
1992 to October 1993; President and Chief Executive Officer of Mallinckrodt
Veterinary, Inc. since December 1992; Senior Vice President and Group Executive
of Mallinckrodt Medical, Inc. from March 1992 to December 1992; Group Vice
President, Medical Imaging, from November 1988 to March 1992. (Mr. Mercer
resigned his positions as Senior Vice President of Mallinckrodt and President
and Chief Executive Officer of Mallinckrodt Veterinary, Inc. effective July 20,
1994).
ROBERT G. MOUSSA
Age 47. Senior Vice President since October 1993; Vice President from December
1992 to October 1993; President and Chief Executive Officer of Mallinckrodt
Medical, Inc., since December 1992; Senior Vice President and Group Executive,
Mallinckrodt Medical, Inc., from September 1992 to December 1992; Group Vice
President, International, Mallinckrodt Medical, Inc., from January 1989 to
September 1992.
MACK G. NICHOLS
Age 56. Senior Vice President since October 1993; Vice President from October
1990 to October 1993; President and Chief Executive Officer of Mallinckrodt
Chemical, Inc. since January 1989.
MICHAEL A. ROCCA
Age 49. Senior Vice President, Chief Financial Officer, and Treasurer since
April 1994; Corporate Vice President and Treasurer of Honeywell Inc. from March
1992 to April 1994; Vice President, Finance, for Honeywell Europe from 1990 to
1992; Vice President and Controller of Honeywell Inc. International Group from
1987 to 1990.
23
<PAGE>
BARBARA A. ABBETT
Age 54. Vice President, Communications since April 1994; Vice President and
Senior Partner with Fleishman-Hillard, Inc., from 1979 to April 1994.
ASHOK CHAWLA
Age 45. Vice President, Strategic Management since July 1991; Vice President
Strategic Planning and Business Development of Mallinckrodt Veterinary, Inc.,
from August 1990 to July 1991; Division Director, Finance and Administration for
Mallinckrodt, Inc. - Europe from August 1988 to August 1990.
BEVERLEY L. HAYES
Age 55. Vice President, Organization and Human Resources since November 1990;
Senior Vice President, Human Resources of Mallinckrodt Veterinary, Inc., from
September 1990 to November 1990; Vice President Human Resources of Mallinckrodt
Veterinary, Inc., from July 1989 to September 1990.
ROGER A. KELLER
Age 49. Vice President, Secretary, and General Counsel since July 1993; Senior
Vice President and General Counsel, Mallinckrodt Medical, Inc., from March 1992
to July 1993; Vice President and General Counsel of Mallinckrodt Medical, Inc.,
from September 1989 to March 1992; Vice President and Secretary, Mallinckrodt,
Inc., since August 1986.
DOUGLAS K. LARSEN
Age 55. Vice President, Environment and Safety since October 1991; Corporate
Staff Vice President, Environment and Safety from September 1988 to October
1991. (Mr. Larsen's employment by the Company ended June 30, 1994).
WILLIAM B. STONE
Age 51. Vice President and Controller since November 1990; Assistant Controller
and Corporate Staff Vice President from October 1989 to November 1990; Vice
President of Mallinckrodt, Inc., since April 1983.
MISCELLANEOUS
All of the Company's officers are elected annually, with the terms of the
officers listed above to expire in October 1994, except as otherwise noted. No
"family relationships," as that term is defined, exist among any of the listed
officers.
24
<PAGE>
George D. Kennedy, Chairman of the Board, is technically an officer of the
Company, but as a retired employee and consultant, has no full-time obligations
and hence is not regarded as or believed to be an Executive Officer. As a
director, his business experience and directorships are described in the
Company's definitive Proxy Statement for the Annual Meeting of Stockholders to
be held October 19, 1994.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
Quarter First Second Third Fourth
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1994
Dividends per common share $.11 $.125 $.125 $.125
Common stock prices
High 33.38 36.63 38.50 34.50
Low 28.13 32.25 30.13 28.50
- ----------------------------------------------------------------------------
Fiscal 1993
Dividends per common share $.10 $.11 $.11 $.11
Common stock prices
High 37.75 40.25 40.25 31.63
Low 31.25 31.25 23.00 23.38
- ----------------------------------------------------------------------------
</TABLE>
The principal market on which Mallinckrodt's common stock is traded is the New
York Stock Exchange. Common stock prices are from the composite tape for New
York Stock Exchange issues as reported in THE WALL STREET JOURNAL.
As of August 31, 1994, the number of registered holders of common stock, as
reported by the Company's registrar, was 10,091.
25
<PAGE>
ITEM 6.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Dollars in millions except per share amounts) Years ended June 30, 1994(1) 1993(1) 1992(1) 1991(2) 1990(3) 1989(4)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,940.1 $1,796.3 $1,702.9 $1,633.9 $1,424.6 $ 982.9
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations $ 107.4 $ (113.8) $ 128.8 $ 97.2 $ 55.3 $ 53.4
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from discontinued operations (5) (3.6) (6.0) (1.3) (9.0) 1.2 63.6
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effects of accounting changes (80.6)
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) 103.8 (200.4) 127.5 88.2 56.5 117.0
- ---------------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends (.4) (.4) (.4) (.4) (4.2) (14.4)
- ---------------------------------------------------------------------------------------------------------------------------------
Available for common shareholders $ 103.4 $ (200.8) $ 127.1 $ 87.8 $ 52.3 $ 102.6
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Per Common Share Data (6)
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations $ 1.38 $ (1.48) $ 1.65 $ 1.37 $ .79 $.57
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) 1.33 (2.60) 1.63 1.24 .81 1.50
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends declared .49 .43 .38 .33 .33 .33
- ---------------------------------------------------------------------------------------------------------------------------------
Book value 13.05 11.77 16.02 14.42 11.97 11.23
- ---------------------------------------------------------------------------------------------------------------------------------
Average common shares (in millions) 77.6 77.4 77.8 70.6 65.0 68.4
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER DATA
<TABLE>
<CAPTION>
(Dollars in millions)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $2,433.5 $2,177.6 $2,050.8 $2,250.2 $2,130.9 $1,971.6
- ---------------------------------------------------------------------------------------------------------------------------------
Working capital 261.3 203.7 351.6 409.0 311.1 594.6
- ---------------------------------------------------------------------------------------------------------------------------------
Current ratio 1.4:1 1.3:1 1.8:1 1.6:1 1.8:1 3.3:1
- ---------------------------------------------------------------------------------------------------------------------------------
Total debt $ 669.8 $ 617.0 $ 373.7 $ 643.4 $ 837.4 $ 773.7
- ---------------------------------------------------------------------------------------------------------------------------------
Net deferred income tax (assets) liabilities (40.9) (36.0) 41.7 48.0 52.9 42.8
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 1,015.9 910.5 1,224.2 1,084.2 824.8 888.2
- ---------------------------------------------------------------------------------------------------------------------------------
Invested capital 1,644.8 1,491.5 1,639.6 1,775.6 1,715.1 1,704.7
- ---------------------------------------------------------------------------------------------------------------------------------
Total debt/invested capital 41% 41% 23% 36% 49% 45%
- ---------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 172.3 $ 188.3 $ 150.4 $ 123.4 $ 85.7 $ 82.2
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends declared 37.7 33.2 29.5 23.7 25.8 36.9
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares outstanding (in millions) 77.0 76.4 75.7 75.2 68.1 60.7
- ---------------------------------------------------------------------------------------------------------------------------------
Number of employees 10,200 10,000 9,500 9,800 9,600 6,900
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)See "Mallinckrodt Management's Discussion and Analysis" for a
description of nonrecurring items.
(2)Results for 1991 included an after-tax gain of $2.0 million, or $.08
per share, from the sale of intangibles at Mallinckrodt Veterinary.
(3)Results for 1990 included favorable adjustments from the conclusion
of income tax audits that amounted to $14.8 million, $11.9 million
after taxes, or $.18 per share, from lower income taxes and higher
interest income. That benefit was partially offset by restructuring
charges of $4.9 million, $3.0 million after taxes, or $.05 per share,
and charges for compensation plans tied to the price of the Company's
common stock that amounted to $3.9 million, $2.4 million after taxes,
or $.04 per share.
(4)Results for 1989 included favorable adjustments from the conclusion
of income tax audits that amounted to $20.8 million, $16.6 million
after taxes, or $.24 per share, from lower income taxes and related
interest charges. Such earnings also included a gain of $3.9 million,
$2.4 million after taxes, or $.03 per share, from the sale of a
business.
(5)See Note 1 of Notes to Consolidated Financial Statements for
information on discontinued operations in 1994, 1993 and 1992. The
results for 1991 included nonrecurring after-tax charges of $2.8
million, or $.04 per share, from net effects related to the IFL stock
sales. The results for 1990 and 1989 included nonrecurring after-tax
gains of $5.2 million, or $.08 per share, and $21.5 million, or $.30
per share, from the sale of the fragrance business and the IFL public
offering, respectively. Results for discontinued operations for 1991,
1990 and 1989 also included after-tax charges of $6.2 million, or
$.09 per share; $7.6 million, or $.12 per share; and $1.7 million, or
$.02 per share, respectively, for environmental and litigation costs
related to operations previously sold.
(6)Presented on a primary per common share basis adjusted for the 3-for-
1 stock split in November 1991.
</TABLE>
26
<PAGE>
ITEM 7. MALLINCKRODT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESUILTS OF OPERATIONS.
[GRAPHIC]
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[GRAPHIC]
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[GRAPHIC]
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[GRAPHIC]
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OVERVIEW
ALL REFERENCES TO YEARS ARE TO FISCAL YEARS ENDED JUNE 30 UNLESS OTHERWISE
STATED.
1994 VS. 1993
Before restructuring charges Mallinckrodt's earnings from continuing operations
were $166 million, or $2.14 per share. Comparable prior year earnings from
continuing operations were $128 million, or $1.65 per share. Excluding favorable
current year tax adjustments totaling $3 million, or $.04 per share, from
recently enacted tax law changes and a 1993 non-recurring corporate expense
charge of $3 million after taxes, or $.04 per share, 1994 results were 24
percent higher than a year ago.
Net earnings for 1994 were $104 million, or $1.33 per share, compared with a
net loss of $200 million, or $2.60 per share, in 1993. Included in these results
were after-tax restructuring charges totaling $59 million, or $.76 per share,
and $242 million, or $3.13 per share, for 1994 and 1993, respectively. The loss
in 1993 also included a non-cash cumulative charge of $81 million, or $1.04 per
share, for adoption of new standards of accounting for income taxes and certain
postretirement/postemployment benefits.
Net sales for 1994 were $1,940 million, compared with $1,796 million a year
earlier. This 8 percent increase was achieved despite unfavorable currency
translation effects, slower volume growth and pricing pressures. Each of
Mallinckrodt's three businesses reported improved operating results for the
year. Operating earnings before the restructuring charges were $287 million in
1994, compared with $225 million in the previous year. Excluding the 1993 non-
recurring corporate expense charge, operating earnings were up 24 percent.
Restructuring charges are discussed in the business sections which follow,
and in Note 1 of Notes to Consolidated Financial Statements (Notes). Charges
for discontinued operations are discussed in Note 1 of the Notes.
1993 VS. 1992
Mallinckrodt's 1993 results from continuing operations, before restructuring
charges, were $128 million, or $1.65 per share, which included a net, non-cash
charge of $4 million after taxes, or $.05 per share, associated with adoption of
new accounting standards. These results compared with 1992 earnings from
continuing operations of $129 million, also $1.65 per share.
The net loss for 1993 was $200 million, or $2.60 per share. Included in this
loss were after-tax restructuring charges totaling $242 million, or $3.13 per
share; a non-cash cumulative charge of $81 million, or $1.04 per share, for
adoption of new standards of accounting for income taxes and certain
postretirement and postemployment benefits, retroactive to July 1, 1992; and
after-tax charges related to discontinued operations of $6 million, or $.08 per
share.
27
<PAGE>
Net sales increased 5 percent while operating earnings, excluding
restructuring charges, were about flat with 1992 after absorbing incremental
pre-tax charges of $8 million for adoption of new accounting standards for
employee benefits. Mallinckrodt Medical's 26 percent increase in sales and 36
percent rise in operating earnings were offset by decreases in Mallinckrodt
Chemical and Mallinckrodt Veterinary.
Restructuring charges are discussed in the Mallinckrodt Chemical and
Mallinckrodt Veterinary sections which follow, and in Note 1 of the Notes. Notes
1, 8 and 13 of the Notes contain further discussion of accounting changes.
Charges for discontinued operations are discussed in Note 1 of the Notes.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MALLINCKRODT CHEMICAL
(In millions) Years Ended June 30, 1994 1993 1992(1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
- -----------------------------------------------------------------------------------
Ongoing operations:
- -----------------------------------------------------------------------------------
Pharmaceutical Specialties $225 $212 $183
- -----------------------------------------------------------------------------------
Catalysts, Performance &
Lab Chemicals 212 183 185
- -----------------------------------------------------------------------------------
437 395 368
- -----------------------------------------------------------------------------------
Divested operations and
flavors business(2) 73
- -----------------------------------------------------------------------------------
$437 $395 $441
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Operating earnings (loss):
Ongoing operations $ 62 $ 46 $ 47
- -----------------------------------------------------------------------------------
Restructuring charge (51)
- -----------------------------------------------------------------------------------
Divested operations and
flavors business(2) 13
- -----------------------------------------------------------------------------------
62 (5) 60
- -----------------------------------------------------------------------------------
Pre-tax equity in joint venture 18 10 1
- -----------------------------------------------------------------------------------
Earnings $ 80 $ 5 $ 61
- -----------------------------------------------------------------------------------
Ongoing operating earnings as
a percent of ongoing sales 14.1% 11.6% 12.6%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
<FN>
(1)Restated to reflect the company's reorganization effective July 1, 1992.
(2)Includes the divestiture of the cosmetic and electronic chemicals businesses
and pre-joint venture operating results of the flavors business.
</TABLE>
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[GRAPHIC]
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[GRAPHIC]
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1994 VS. 1993
Mallinckrodt Chemical's operating earnings of $62 million and an $18 million
pre-tax equity-investment share of earnings from its Tastemaker flavors joint
venture totaled $80 million. Excluding the 1993 restructuring charge, this
represented a 42 percent earnings improvement over last year. Net sales
increased 11 percent to $437 million. The 1993 restructuring program is
producing anticipated results with the exit of the aromatic flourine
intermediates business substantially completed in 1994 and the exit of the
photochemicals business expected to be substantially completed in 1995.
Catalysts, performance and lab chemicals sales increased 15 percent,
principally from higher sales volume in catalysts and performance chemicals.
Improved plant operations in performance chemicals and favorable comparisons in
restructured businesses also contributed to higher operating earnings in 1994.
Management expects the 1994 acquisition of Catalyst Resources, Inc., a
manufacturer of polymerization catalysts, to contribute to future results.
28
<PAGE>
Pharmaceutical specialties sales increased 6 percent. Contributing
significantly to improved operating results were higher worldwide medicinal
narcotics sales primarily due to increased sales volume and improved medicinal
narcotics plant operations. Results for 1994 were negatively affected by a
scheduled Raleigh, North Carolina, plant maintenance shutdown in the first
quarter, additional investment in the peptides business and flat acetaminophen
(APAP) worldwide sales compared with 1993.
The Tastemaker flavors joint venture made a significant contribution to the
1994 results with a 75 percent increase in earnings due to strong worldwide
growth and efficiencies from manufacturing consolidation programs completed in
1993.
1993 VS. 1992
Mallinckrodt Chemical's operating loss of $5 million included a pre-tax
restructuring charge of $51 million, primarily to exit the company's aromatic
fluorine intermediates (AFI) and photochemicals businesses.
Excluding the restructuring charge, Mallinckrodt Chemical's operating
earnings, plus its equity in the flavors joint venture, decreased $5 million
from 1992. Year-to-year performance comparisons were negatively influenced by
additional 1993 expenses of $3 million from accounting changes for employee
benefits, and, in 1992's second half, the formation of a flavors joint venture
and the divestiture of non-strategic businesses. After adjusting for these
events, 1993 ongoing operating earnings improved 5 percent on a corresponding
net sales increase of 7 percent.
Catalysts, performance and lab chemicals ongoing sales were one percent below
1992 principally because of lower AFI sales volumes and recessionary conditions
that plagued the business throughout most of 1993. Higher sales from the new lab
chemical product disposal service favorably impacted results. The AFI and
photochemicals businesses, which are to be exited, detracted from 1993 earnings.
Pharmaceutical specialties ongoing sales improved 16 percent. Higher sales
volumes for APAP and medicinal narcotics, and to a much lesser extent January
price increases, contributed significantly to the improved ongoing results. The
company's continued investment in its recently started peptides business reduced
overall 1993 performance.
The Tastemaker flavors joint venture earnings continued significant positive
momentum. Sales for the venture were nearly $200 million in its first year ended
December 31, 1992. Additional costs relating to rationalization of its major
production facilities in the U.S. negatively affected earnings in the first half
of 1993. Tastemaker's performance improved in the last six months of the fiscal
year to exceed expectations for 1993.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MALLINCKRODT MEDICAL
(In millions) Years Ended June 30, 1994 1993 1992(1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
- -----------------------------------------------------------------------------------
Radiology & Cardiology $436 $382 $294
- -----------------------------------------------------------------------------------
Nuclear Medicine 186 182 160
- -----------------------------------------------------------------------------------
Anesthesiology &
Critical Care 290 219 166
- -----------------------------------------------------------------------------------
$912 $783 $620
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Operating earnings:
- -----------------------------------------------------------------------------------
Ongoing operations $203 $174 $128
- -----------------------------------------------------------------------------------
Restructuring charge (74)
- -----------------------------------------------------------------------------------
$129 $174 $128
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Ongoing operating earnings as
a percent of sales 22.2% 22.3% 20.6%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
[GRAPHIC]
- -------------------------------------------------------------------------------
[GRAPHIC]
- -------------------------------------------------------------------------------
29
<PAGE>
1994 VS. 1993
Mallinckrodt Medical's net sales were $912 million and operating earnings before
a restructuring charge were $203 million, both up 16 percent from 1993.
The 1994 pre-tax restructuring charge of $74 million resulted from fourth
quarter decisions made pursuant to efforts conducted during the year to develop
strategies to effectively respond to customer needs and compete in a market that
is changing rapidly as the result of health care reform. The key components of
the charge were reorganization of the current medical specialty oriented U.S.
sales structure into a unified sales organization divided into geographical
districts; reorganization to reduce, centralize and standardize certain non-
sales related functions and management processes; relocation of the Argyle, New
York, tracheostomy tube manufacturing operations to existing plants in Athlone,
Ireland, and Irvine, California, and a new facility to be built in Juarez,
Mexico; and severance costs related to an associated work-force reduction of
approximately 500 employees at various locations around the world. Restructuring
actions related to the program are in process and are expected to be
substantially complete in one year. Pre-tax cash expenditures should approximate
$65 million of which about $50 million will occur in 1995. After-tax cash costs
of the program will be about $74 million, consisting of the above cash costs and
an additional $34 million of capital spending that will be incurred relating to
information systems and manufacturing rationalization. Annual pre-tax savings
from the restructuring will be approximately $40 million, with partial benefit
in fiscal 1995 and most of the savings achieved in 1996.
Radiology and cardiology sales increased 14 percent. Higher Optiray sales
volume in the U.S., Japan and Europe and increased catheter sales volume were
the primary contributors to the improvement. The earnings effect of the higher
sales was partially offset by higher standard product costs associated with the
new Ireland Ioversol production facility and pricing pressures related to
Optiray. The Optiray production capacity expansions underway last year were
essentially complete by year end. Management received approval of Albunex, its
ultrasound contrast agent in August 1994, with product launch anticipated soon.
Nuclear medicine sales showed an increase of 2 percent. Higher sales volume
in the U.S. and Europe associated with thallium and TechneScan MAG3 were
partially offset by unfavorable foreign exchange rates and price pressures. In
June 1994, OctreoScan, a radiopharmaceutical used to aid diagnosis of certain
cancer tumors, received FDA approval. This and other new products are expected
to help improve sales growth.
Strong results for the anesthesiology and critical care business were a
significant factor in the overall year-to-year comparison. Sales increased 32
percent. Newly acquired businesses and improved U.S. sales associated with
HemoCue as a result of hemoglobin products receiving waiver status contributed
to the improvement. Operating earnings increases were partially offset by
unfavorable year-to-year foreign currency effects and amortization of
intangibles related to acquisitions.
1993 VS. 1992
Mallinckrodt Medical's strong performance continued through 1993. Net sales
increased 26 percent and operating earnings rose 36 percent, after absorbing $4
million in additional pre-tax charges related to changes in accounting for
employee benefits. Results were balanced as all segments of the business, led by
radiology, contributed to the improvement.
The excellent performance of the radiology and cardiology business continued
as sales were up 30 percent. Strong sales volume for the x-ray contrast medium
Optiray in North America and Europe, and product introduction in Japan, which
was begun in late 1992, were the main contributors.
Nuclear medicine sales increased 14 percent. Higher sales of thallium in the
U.S. and Europe associated with double injection procedures and pharmacological
stress tests favorably impacted results. The rate of increase over 1992 for
thallium sales moderated in the second half of 1993. Higher TechneScan MAG3 and
UltraTag RBC agent kit sales and continued growth of OctreoScan sales in Europe
contributed to the improved results.
Anesthesiology and critical care sales improved 32 percent. Higher airway
management product sales, the full year impact of the WarmTouch product line
sales, higher sales associated with the GEM family of blood gas and electrolyte
analyzers, and acquired businesses were all factors in increased results.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MALLINCKRODT VETERINARY
(In millions) Years Ended June 30, 1994 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
- -----------------------------------------------------------------------------------
Pharmaceuticals $249 $258 $285
- -----------------------------------------------------------------------------------
Biologicals 95 105 104
- -----------------------------------------------------------------------------------
Feed Ingredients 162 169 172
- -----------------------------------------------------------------------------------
Veterinary Specialties & Other 86 86 81
- -----------------------------------------------------------------------------------
$592 $618 $642
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Operating earnings (loss):
- -----------------------------------------------------------------------------------
Ongoing operations $ 53 $ 40 $ 69
- -----------------------------------------------------------------------------------
Restructuring charges (20) (283)
- -----------------------------------------------------------------------------------
$ 33 $(243) $ 69
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Ongoing operating earnings
as a percent of sales 8.9% 6.5% 10.8%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- -------------------------------------------------------------------------------
[GRAPHIC]
- -------------------------------------------------------------------------------
[GRAPHIC]
- -------------------------------------------------------------------------------
1994 VS. 1993
Mallinckrodt Veterinary's operating earnings of $33 million included a pre-tax
restructuring charge of $20 million to adjust a prior year provision associated
with the decision to discontinue development of porcine somatotropin (PST) in
May 1993. This adjustment effectively removes all remaining PST valuation risk.
Excluding restructuring charges in both years, Mallinckrodt Veterinary's
operating earnings increased 31 percent compared to the previous year on a sales
decline of 4 percent. Improved operating earnings resulted from actions related
to the restructuring program begun last year, which included various cost
control measures, plant closures and a workforce reduction of approximately
1,000 employees resulting in severance costs of $25 million. Lower sales
resulted primarily from global product rationalization programs designed to
eliminate low margin products and from unfavorable currency translation effects.
Pharmaceutical sales for the year decreased 3 percent primarily from product
rationalization programs in Australia and New Zealand and unfavorable currency
translation. Strong sales of parasiticides in Europe, higher sales volumes in
Brazil resulting from expanded distribution rights, and increased sales of
growth promotants in North America partially offset the sales decrease.
Biological sales were down 10 percent for the year, principally from supply
and production problems, unfavorable currency translation effects, product
rationalization programs and lower volumes of companion animal vaccine sales in
North America, partially offset by higher foot and mouth disease vaccine sales
in Brazil.
Feed ingredients sales declined 4 percent from the previous year due to
continuing price deterioration on lower U.S. sales volume.
Veterinary specialities sales were up slightly compared to last year,
primarily from increased sales volumes in Latin America. Lower sales volumes of
a divested business in North America and unfavorable currency translation
negatively impacted 1994 sales.
1993 VS. 1992
Mallinckrodt Veterinary's operating loss of $243 million included a pre-tax
restructuring charge of $283 million related to actions taken as a result of its
unsatisfactory performance. The major components of the charge were the decision
to discontinue development of Mallinckrodt Veterinary's Grolene brand of porcine
somatotropin, including manufacturing and support facilities; closure and
consolidation of manufacturing plants and other distribution and support
facilities; redefinition and reorganization of research and development,
commercial and administrative functions; exit from certain animal health
businesses; and severance costs related to a substantial work-force reduction.
Excluding the restructuring charge, Mallinckrodt Veterinary's operating
earnings declined to $40 million on a net sales decrease of 4 percent, mainly
due to higher manufacturing costs, delayed restart of certain plant operations,
lower North American sales volumes and European recessionary conditions.
Continuing price pressures and lower volumes in feed ingredients and $2 million
in expenses from accounting changes for employee benefits were also negatives.
Sales of pharmaceutical products decreased by 9 percent principally because
of lower animal productivity, antimicrobial and parasiticide volumes. Timing of
prior year marketing and sales programs and shutdown of pharmaceutical
manufacturing in Kansas City, Kansas, were key contributors to the lower sales.
Biological sales were up slightly due to favorable pricing in Brazil which
was almost offset by competitive pricing pressures in North America.
Veterinary specialties sales improved 6 percent from increases across a broad
range of these products.
31
<PAGE>
CORPORATE MATTERS
Corporate expense decreased $5 million to $30 million in 1994, after increasing
$5 million in 1993. These changes related primarily to the 1993 pre-tax charges
of $6 million for executive resignations resulting from the performance of
Mallinckrodt Veterinary.
Interest and other nonoperating income (expense), net declined $3 million in
1994 from 1993. This decrease related primarily to the write-down of an
investment, higher bank charges and lower interest income.
Interest expense increased $2 million in 1994 from higher borrowings and
increased interest rates.
Mallinckrodt's reported effective tax rate for continuing operations was 37.3
percent in 1994. Excluding the impact of restructuring charges and statutory
rate changes, that rate was 38.5 percent, compared with 36.8 percent in 1993.
See Note 8 of the Notes for further discussion of income taxes.
FINANCIAL CONDITION
Mallinckrodt's financial resources are expected to continue to be adequate to
support existing businesses, fund the remaining cash expenditures of
approximately $130 million for the Company's restructuring programs and fund new
opportunities. Since June 30, 1993, cash and cash equivalents increased $37
million. Operations provided $227 million of cash, while acquisition and capital
spending totaled $268 million, $61 million of which related to the acquisition
of Catalyst Resources, Inc. and $28 million related to the acquisition of DAR
S.p.A. In July 1993, the Company received $52 million in cash for its dividend
receivable from IMC Fertilizer Group, Inc. The Company's current ratio at June
30, 1994, was 1.4:1. Total debt as a percentage of invested capital was 41
percent.
In August 1987 and October 1988, the Company's Board of Directors authorized
repurchase of a total of 42 million shares of its common stock. Since then 29
million shares have been purchased under this authorization, of which none were
purchased during the year ended June 30, 1994.
On April 8, 1992, a shelf registration statement was filed with the SEC for
$250 million of debt securities. In 1994, the Company offered $100 million of 6%
Notes due October 15, 2003, and $100 million of 7% Debentures due December 15,
2013, from this shelf registration. Net proceeds from these offerings totaled
$198 million, of which $90 million was used to replace short-term notes related
to 1993 acquisitions. Such notes had been classified as long-term debt at June
30, 1993.
The Company has a $350 million private-placement commercial paper program.
This program is backed by $450 million of U.S. lines of credit, of which $350
million is available until August 1996 and $100 million is up for renewal in
August 1994. At June 30, 1994, commercial paper borrowings and borrowings under
the U.S. credit line amounted to $172 million and $10 million, respectively. At
June 30, 1994, non-U.S. lines of credit totaling $218 million were also
available and borrowings under these lines amounted to $45 million. The non-U.S.
lines are cancellable at any time.
Estimated capital spending for the fiscal year ending June 30, 1995, is
approximately $260 million.
OTHER MATTERS
The Company does not consider the present rate of inflation to have a
significant impact on the businesses in which it operates except for the
hyperinflationary effects on the Latin American businesses of Mallinckrodt
Veterinary which are discussed in Note 16 of the Notes.
See Note 19 of the Notes for a discussion of environmental matters.
- -------------------------------------------------------------------------------
[GRAPHIC]
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[GRAPHIC]
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[GRAPHIC]
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32
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 34
Information by Business Segment. . . . . . . . . . . . . . . . . . . . . . 35
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . 36
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . 37
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . 38
Consolidated Statement of Changes in Shareholders' Equity. . . . . . . . . 39
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 40
Quarterly Results (Unaudited). . . . . . . . . . . . . . . . . . . . . . . 50
33
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Mallinckrodt Group Inc.
We have audited the accompanying consolidated balance sheet of Mallinckrodt
Group Inc. as of June 30, 1994 and 1993, and the related consolidated statements
of operations, changes in shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1994, appearing on pages 35 through 50.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mallinckrodt Group
Inc. at June 30, 1994 and 1993, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended June 30,
1994, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Notes 8 and 13 to the consolidated financial statements, in
1993 the Company changed its method of accounting for income taxes and employee
benefits.
/s/ Ernst & Young LLP
Ernst & Young LLP
St. Louis, Missouri
August 9, 1994
34
<PAGE>
- - INFORMATION BY BUSINESS SEGMENT
NET SALES
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mallinckrodt Chemical $ 436.9 $ 395.3 $ 440.9
- ------------------------------------------------------------------------------------------------------------------------
Mallinckrodt Medical 912.3 783.1 620.3
- ------------------------------------------------------------------------------------------------------------------------
Mallinckrodt Veterinary 591.7 618.1 641.8
- ------------------------------------------------------------------------------------------------------------------------
Intersegment sales (.8) (.2) (.1)
- ------------------------------------------------------------------------------------------------------------------------
Consolidated $1,940.1 $1,796.3 $1,702.9
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
EARNINGS AND ASSETS
<TABLE>
<CAPTION>
Earnings (Loss) from Continuing
Operations Before Income Taxes Identifiable Assets
----------------------------------- ----------------------------------
(In millions) 1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mallinckrodt Chemical $ 61.7 $ (5.4) $ 59.7 $ 574.9 $ 460.8 $ 486.8
- ------------------------------------------------------------------------------------------------------------------------
Mallinckrodt Medical 128.9 174.4 127.8 1,102.5 888.6 634.0
- ------------------------------------------------------------------------------------------------------------------------
Mallinckrodt Veterinary 32.6 (242.5) 69.0 660.0 698.0 778.9
- ------------------------------------------------------------------------------------------------------------------------
Corporate (30.2) (35.5) (30.5) 96.9 132.8 151.8
- ------------------------------------------------------------------------------------------------------------------------
Eliminations .1 (.5) (.8) (2.6) (.7)
- ------------------------------------------------------------------------------------------------------------------------
Operating earnings (loss) 193.1 (109.0) 225.5
- ------------------------------------------------------------------------------------------------------------------------
Equity in pre-tax earnings
of joint venture 18.5 10.6 1.6
- ------------------------------------------------------------------------------------------------------------------------
Interest and other
nonoperating income (expense), net (.4) 2.6 15.3
- ------------------------------------------------------------------------------------------------------------------------
Interest expense (39.8) (37.3) (39.6)
- ------------------------------------------------------------------------------------------------------------------------
Consolidated $171.4 $(133.1) $202.8 $2,433.5 $2,177.6 $2,050.8
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Capital Expenditures Depreciation and Amortization
---------------------------------- ----------------------------------
(In millions) 1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mallinckrodt Chemical $ 41.6 $ 46.2 $ 35.9 $ 26.4 $ 28.0 $ 29.2
- ------------------------------------------------------------------------------------------------------------------------
Mallinckrodt Medical 99.4 95.0 44.4 47.8 37.1 27.2
- ------------------------------------------------------------------------------------------------------------------------
Mallinckrodt Veterinary 28.1 45.9 54.1 27.9 28.8 30.5
- ------------------------------------------------------------------------------------------------------------------------
Corporate 3.2 1.2 16.0 2.5 2.2 2.4
- ------------------------------------------------------------------------------------------------------------------------
Consolidated $172.3 $ 188.3 $150.4 $ 104.6 $ 96.1 $ 89.3
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Note 17 of the Notes to Consolidated Financial Statements)
35
<PAGE>
- - CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(In millions except per share amounts) Years ended June 30, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,940.1 $1,796.3 $1,702.9
- ------------------------------------------------------------------------------------------------------------------------
Operating costs and expenses:
- ------------------------------------------------------------------------------------------------------------------------
Cost of goods sold 1,037.3 970.6 915.6
- ------------------------------------------------------------------------------------------------------------------------
Selling, administrative and general expenses 522.0 511.2 480.3
- ------------------------------------------------------------------------------------------------------------------------
Research and development expenses 95.3 95.3 90.5
- ------------------------------------------------------------------------------------------------------------------------
Restructuring charge 93.9 334.1
- ------------------------------------------------------------------------------------------------------------------------
Other operating income, net (1.5) (5.9) (9.0)
- ------------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 1,747.0 1,905.3 1,477.4
- ------------------------------------------------------------------------------------------------------------------------
Operating earnings (loss) 193.1 (109.0) 225.5
- ------------------------------------------------------------------------------------------------------------------------
Equity in pre-tax earnings of joint venture 18.5 10.6 1.6
- ------------------------------------------------------------------------------------------------------------------------
Interest and other nonoperating income (expense), net (.4) 2.6 15.3
- ------------------------------------------------------------------------------------------------------------------------
Interest expense (39.8) (37.3) (39.6)
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before income taxes 171.4 (133.1) 202.8
Income tax provision (benefit) 64.0 (19.3) 74.0
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 107.4 (113.8) 128.8
- ------------------------------------------------------------------------------------------------------------------------
Loss from discontinued operations (3.6) (6.0) (1.3)
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of accounting changes 103.8 (119.8) 127.5
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes (80.6)
- ------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) 103.8 (200.4) 127.5
- ------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends (.4) (.4) (.4)
- ------------------------------------------------------------------------------------------------------------------------
Available for common shareholders $ 103.4 $ (200.8) $ 127.1
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations $ 1.38 $ (1.48) $ 1.65
- ------------------------------------------------------------------------------------------------------------------------
Discontinued operations (.05) (.08) (.02)
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of accounting changes 1.33 (1.56) 1.63
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes (1.04)
- ------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1.33 $ (2.60) $ 1.63
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)
36
<PAGE>
- - CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
(In millions) At June 30, 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 87.9 $ 51.3
- ------------------------------------------------------------------------------------------------------------------------
Trade receivables, less allowances of $11.1 in 1994 and $13.4 in 1993 343.6 319.4
- ------------------------------------------------------------------------------------------------------------------------
IFL dividend receivable 51.9
- ------------------------------------------------------------------------------------------------------------------------
Inventories 376.9 353.4
- ------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 77.6 21.3
- ------------------------------------------------------------------------------------------------------------------------
Other current assets 46.0 39.2
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 932.0 836.5
- ------------------------------------------------------------------------------------------------------------------------
Investments and long-term receivables, less allowances of
$13.1 in 1994 and $12.5 in 1993 147.0 132.6
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment 1,396.0 1,192.9
- ------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation (532.8) (494.0)
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 863.2 698.9
- ------------------------------------------------------------------------------------------------------------------------
Intangible assets 489.3 466.9
- ------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 2.0 42.7
- ------------------------------------------------------------------------------------------------------------------------
Total assets $2,433.5 $2,177.6
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
(In millions except share and per share amounts)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
- ------------------------------------------------------------------------------------------------------------------------
Short-term debt $ 147.8 $ 189.4
- ------------------------------------------------------------------------------------------------------------------------
Accounts payable 139.4 117.6
- ------------------------------------------------------------------------------------------------------------------------
Accrued liabilities 356.0 311.9
- ------------------------------------------------------------------------------------------------------------------------
Income taxes payable 25.4 11.4
- ------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 2.1 2.5
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 670.7 632.8
- ------------------------------------------------------------------------------------------------------------------------
Long-term debt, less current maturities 522.0 427.6
- ------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 36.6 25.5
- ------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefits 124.7 121.0
- ------------------------------------------------------------------------------------------------------------------------
Other noncurrent liabilities and deferred credits 63.6 60.2
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,417.6 1,267.1
- ------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
- ------------------------------------------------------------------------------------------------------------------------
4 Percent cumulative preferred stock 11.0 11.0
- ------------------------------------------------------------------------------------------------------------------------
Common stock, par value $1, authorized 300,000,000 shares;
issued 87,116,289 shares in 1994 and 1993 87.1 87.1
- ------------------------------------------------------------------------------------------------------------------------
Capital in excess of par value 268.2 262.4
- ------------------------------------------------------------------------------------------------------------------------
Reinvested earnings 846.4 780.3
- ------------------------------------------------------------------------------------------------------------------------
Marketable securities valuation allowance (1.4) (2.2)
- ------------------------------------------------------------------------------------------------------------------------
Foreign currency translation (32.8) (56.4)
- ------------------------------------------------------------------------------------------------------------------------
Treasury stock, at cost (162.6) (171.7)
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,015.9 910.5
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $2,433.5 $2,177.6
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)
37
<PAGE>
- - CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS -- OPERATING ACTIVITIES
<TABLE>
<CAPTION>
(In millions) Years ended June 30, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss) $103.8 $(200.4) $127.5
- ------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
- ------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 104.6 96.1 89.3
- ------------------------------------------------------------------------------------------------------------------------
Restructuring charge 93.0 312.6
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes 80.6
- ------------------------------------------------------------------------------------------------------------------------
Postretirement benefits 8.3 7.1
- ------------------------------------------------------------------------------------------------------------------------
Deferred income taxes (5.2) (60.6) 19.6
- ------------------------------------------------------------------------------------------------------------------------
Gains on disposals of assets (.6) (2.4) (14.3)
- ------------------------------------------------------------------------------------------------------------------------
Discontinued operations (9.7)
- ------------------------------------------------------------------------------------------------------------------------
Other, net (21.4) (58.4) (42.1)
- ------------------------------------------------------------------------------------------------------------------------
282.5 174.6 170.3
- ------------------------------------------------------------------------------------------------------------------------
Changes in noncash operating working capital:
- ------------------------------------------------------------------------------------------------------------------------
Accounts receivable (12.6) 9.7 (39.1)
- ------------------------------------------------------------------------------------------------------------------------
Inventories (11.4) (11.1) (45.4)
- ------------------------------------------------------------------------------------------------------------------------
Accounts payable, accrued liabilities and income taxes, net (32.1) (37.6) (61.3)
- ------------------------------------------------------------------------------------------------------------------------
Other, net .9 1.0 .1
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 227.3 136.6 24.6
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS -- INVESTING ACTIVITIES
Capital expenditures (172.3) (188.3) (150.4)
- ------------------------------------------------------------------------------------------------------------------------
Acquisition spending (95.5) (201.2) (35.6)
- ------------------------------------------------------------------------------------------------------------------------
IFL dividend receivable 51.9
- ------------------------------------------------------------------------------------------------------------------------
Equity in pre-tax earnings of joint venture, net 14.4 7.7
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from asset disposals 8.6 19.9 44.5
- ------------------------------------------------------------------------------------------------------------------------
Short-term investments 147.8
- ------------------------------------------------------------------------------------------------------------------------
IFL stock sales 139.3
- ------------------------------------------------------------------------------------------------------------------------
Other, net (7.2) (23.3) (4.7)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (200.1) (385.2) 140.9
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS -- FINANCING ACTIVITIES
Increase (decrease) in short-term debt (58.6) 71.4 (225.0)
- ------------------------------------------------------------------------------------------------------------------------
Payments on long-term debt (101.6) (11.1) (64.4)
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from long-term debt 196.4 193.3 7.6
- ------------------------------------------------------------------------------------------------------------------------
Issuance of Mallinckrodt common stock 10.9 17.9 33.9
- ------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock (6.5) (33.8)
- ------------------------------------------------------------------------------------------------------------------------
Dividends paid (37.7) (33.2) (29.5)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 9.4 231.8 (311.2)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 36.6 (16.8) (145.7)
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 51.3 68.1 213.8
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 87.9 $ 51.3 $ 68.1
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)
38
<PAGE>
- - CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Common Capital in Reinvested Other Treasury
Stock Stock Excess of Earnings Stock
(In millions except per share amounts) Par Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1991 $10.0 $ 145.2 $179.1 $ 915.9 $ .4 $(166.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings 127.5
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends
- ----------------------------------------------------------------------------------------------------------------------------------
4 Percent cumulative preferred stock
($4.00 a share) (.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock ($.3833 a share) (29.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Change in par value (116.2) 116.2
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock split 58.1 (58.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock option exercises 14.4 19.8
- ----------------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock (33.8)
- ----------------------------------------------------------------------------------------------------------------------------------
Marketable securities valuation adjustment (.7)
- ----------------------------------------------------------------------------------------------------------------------------------
Translation adjustment 37.6
- ----------------------------------------------------------------------------------------------------------------------------------
Other 1.0 1.8 2.2
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1992 11.0 87.1 253.1 1,013.9 37.3 (178.2)
- ----------------------------------------------------------------------------------------------------------------------------------
Net loss (200.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends
- ----------------------------------------------------------------------------------------------------------------------------------
4 Percent cumulative preferred stock
($4.00 a share) (.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock ($.43 a share) (32.8)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock option exercises 7.1 10.8
- ----------------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock (6.5)
- ----------------------------------------------------------------------------------------------------------------------------------
Marketable securities valuation adjustment (.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Translation adjustment (95.5)
- ----------------------------------------------------------------------------------------------------------------------------------
Other 2.2 2.2
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1993 11.0 87.1 262.4 780.3 (58.6) (171.7)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings 103.8
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends
- ----------------------------------------------------------------------------------------------------------------------------------
4 Percent cumulative preferred stock
($4.00 a share) (.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock ($.485 a share) (37.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock option exercises 4.0 6.9
- ----------------------------------------------------------------------------------------------------------------------------------
Marketable securities valuation adjustment .8
- ----------------------------------------------------------------------------------------------------------------------------------
Translation adjustment 23.6
- ----------------------------------------------------------------------------------------------------------------------------------
Other 1.8 2.2
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1994 $11.0 $ 87.1 $268.2 $ 846.4 $(34.2) $(162.6)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)
39
<PAGE>
- - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions except per share amounts)
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Financial statements of all majority owned subsidiaries are consolidated.
Investments in 20 to 50 percent owned affiliates are reported on the equity
method.
ACCOUNTING CHANGES
In the fourth quarter of 1993 Mallinckrodt adopted Statements of Financial
Accounting Standards (FAS) No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions," FAS No. 109 "Accounting for Income Taxes" and FAS
No. 112 "Employers' Accounting for Postemployment Benefits," all retroactive to
July 1, 1992. See also Notes 8 and 13.
FOREIGN CURRENCY TRANSLATION
The financial statements of most of the Company's international affiliates are
translated into U.S. dollars using current exchange rates. Unrealized
translation adjustments are included in shareholders' equity in the Consolidated
Balance Sheet.
The financial statements of international affiliates that operate in
hyperinflationary economies, principally Brazil and Argentina, are translated at
either current or historical exchange rates, as appropriate. Unrealized
translation adjustments are included in operating results for these affiliates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of certificates of deposit, time
deposits and other short-term securities with maturities of three months or less
from the date of purchase.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost for inventories is
determined on either an average or first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is based upon
estimated useful lives of 15 to 45 years for buildings and 4 to 15 years for
machinery and equipment, using principally the straight-line method.
When property or equipment is disposed, the related cost and accumulated
depreciation are eliminated from the respective accounts. Any gain or loss on
disposition is reflected in current period income or expense.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to the current
year presentation.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 1
CHANGES IN BUSINESS
NAME CHANGE AND HEADQUARTERS RELOCATION
On March 15, 1994, shareholders approved changing the Company's name from IMCERA
Group Inc. to Mallinckrodt Group Inc. Simultaneous with the corporate name
change, Mallinckrodt Specialty Chemicals changed its name to Mallinckrodt
Chemical, Inc. and Pitman-Moore changed its name to Mallinckrodt Veterinary,
Inc.
In March 1994, the Company moved its corporate headquarters from Northbrook,
Illinois, to St. Louis, Missouri.
RESTRUCTURING PROGRAMS
In the fourth quarter of 1994 the Company recorded a restructuring charge of
$93.9 million, $58.8 million after taxes, or $.76 per share, relating to
Mallinckrodt Medical and Mallinckrodt Veterinary. Restructuring actions related
to the program are in process and are expected to be substantially complete in
one year. The Mallinckrodt Medical pre-tax restructuring charge of $73.9 million
included the reorganization of the current medical specialty oriented U.S. sales
structure into a unified organization divided into geographical districts;
reorganization to reduce, centralize and standardize certain non-sales related
functions and management processes; rationalization of manufacturing operations
for substantial worldwide cost and sourcing improvements; and severance costs
related to an associated work-force reduction. Pre-tax cash expenditures for
this restructuring should approximate $65 million, consisting of $28 million for
severance costs for about 500 people at various locations around the world, $15
million for consulting, $13 million for manufacturing rationalization and $9
million for other items. The non-cash pre-tax portion of the charge should
approximate $9 million, primarily relating to manufacturing rationalization.
Also included in the restructuring is an additional $20 million pre-tax charge
to adjust a prior year provision associated with Mallinckrodt Veterinary's
decision to discontinue development of porcine somatotropin (PST) in May 1993.
In the fourth quarter of 1993 the Company recorded a restructuring charge of
$334.1 million, $242.2 million after taxes, or $3.13 per share relating to
Mallinckrodt Veterinary and Mallinckrodt Chemical. Restructuring actions related
to the program are substantially complete at June 30, 1994 and the remainder
will be complete in approximately one year. Pre-tax cash expenditures for
restructuring charges are expected to approximate the original estimate of $173
million and are primarily related to severance costs of $54 million, lease costs
related to a closed facility of $55 million, consulting costs of $15 million,
and manufacturing rationalization and other costs of $49 million. As of June 30,
1994, $79 million has been spent relating to the restructuring. The $161 million
non-cash portion of the charges primarily related to the write-off of plant
facilities.
40
<PAGE>
The Mallinckrodt Veterinary 1993 pre-tax restructuring charge of $282.8
million included the discontinuance of the development of the Grolene brand of
porcine somatotropin, including manufacturing and support facilities; closure
and consolidation of manufacturing and other distribution and support
facilities; redefinition and reorganization of research and development,
commercial and administrative functions; exit of certain animal health
businesses; and severance costs related to a work-force reduction of
approximately 1,000 employees.
As part of the 1993 program, Mallinckrodt Chemical also recorded a pre-tax
charge of $51.3 million, primarily to exit its aromatic fluorine intermediates
and photochemical businesses and close or sell the related facilities. The
restructuring charge included approximately $40 million for write-down of
carrying value of plant facilities and $11 million of cash expenditures.
ACQUISITIONS
In 1994, Mallinckrodt Chemical acquired Catalyst Resources, Inc., a manufacturer
of polymerization and chemical catalysts for $61.2 million, and Mallinckrodt
Medical acquired DAR S.p.A., a manufacturer of anesthesiology and respiratory
care products for $28.0 million. These acquisitions were accounted for as
purchases.
In 1993, Mallinckrodt Medical acquired the businesses of HemoCue
Intressenter, A.B., a manufacturer of point-of-care blood chemistry systems, and
the tracheostomy products business of Sorin Biomedical, Inc. The acquisitions
were accounted for as purchases. The cost of these acquisitions, including
acquisition accruals, totaled $198.0 million.
The results of operations of the above acquisitions were included in the
consolidated financial statements from their respective acquisition dates.
Results of operations for periods prior to acquisition were not material to
Mallinckrodt.
TASTEMAKER JOINT VENTURE
Effective February 1, 1992, the Fries & Fries, Inc. unit of Mallinckrodt
Chemical and Hercules Incorporated's flavors businesses were combined to form a
50/50 joint-venture partnership. Results subsequent to the formation of the
joint venture were recorded on a pre-tax equity basis. The 1992 results included
charges totaling $3.8 million, $2.4 million after taxes, or $.03 per share, for
combining the two businesses. Related income taxes were included in the
Company's consolidated income tax provision.
DIVESTITURES
In 1992, Mallinckrodt Chemical disposed of its electronic and cosmetic chemical
businesses. Results of operations and the effect of the disposition of these
businesses were not material to Mallinckrodt.
DISCONTINUED OPERATIONS
The discontinued operations charges for 1994, 1993 and 1992 primarily included
environmental and related litigation costs and postretirement benefits costs
related to operations previously disposed.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 2
EARNINGS PER COMMON SHARE
Earnings per common share amounts were computed on the basis of the weighted
average number of common and common equivalent shares outstanding. Such weighted
average shares used in the computations were 77,607,416 in 1994; 77,408,668 in
1993 and 77,801,473 in 1992.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 3
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid $33.0 $35.8 $34.1
- --------------------------------------------------------------------------------
Income taxes paid 37.8 35.1 63.3
- --------------------------------------------------------------------------------
Non-cash investing and
financing activities:
- --------------------------------------------------------------------------------
Assumption of liabilities
related to acquisitions 12.2
- --------------------------------------------------------------------------------
Issuance of common stock for
restricted stock awards 4.0 4.4 5.0
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 4
INVENTORIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
At June 30, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Mallinckrodt Chemical $106.8 $ 94.1
- --------------------------------------------------------------------------------
Mallinckrodt Medical 141.5 128.5
- --------------------------------------------------------------------------------
Mallinckrodt Veterinary 129.3 131.6
- --------------------------------------------------------------------------------
Intersegment eliminations (.7) (.8)
- --------------------------------------------------------------------------------
$376.9 $353.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 5
INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Tastemaker joint venture $ 74.9 $ 62.0
- -------------------------------------------------------------------------------
Other investments 21.4 19.1
- -------------------------------------------------------------------------------
Other long-term receivables, net 50.7 51.5
- -------------------------------------------------------------------------------
$147.0 $132.6
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
NOTE 6
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Land $ 69.3 $ 67.5
- -------------------------------------------------------------------------------
Buildings and
leasehold improvements 352.9 270.1
- -------------------------------------------------------------------------------
Machinery and equipment 872.4 695.5
- -------------------------------------------------------------------------------
Construction in progress 101.4 159.8
- -------------------------------------------------------------------------------
1,396.0 1,192.9
- -------------------------------------------------------------------------------
Accumulated depreciation (532.8) (494.0)
- -------------------------------------------------------------------------------
$ 863.2 $ 698.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capitalized interest costs were $3.7 million in 1994, $6.3 million in 1993 and
$1.8 million in 1992.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
NOTE 7
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Goodwill and other intangibles $518.9 $529.0
- -------------------------------------------------------------------------------
Patents and technology 63.7 55.5
- -------------------------------------------------------------------------------
Contracts 18.8
- -------------------------------------------------------------------------------
582.6 603.3
- -------------------------------------------------------------------------------
Accumulated amortization (111.0) (150.2)
- -------------------------------------------------------------------------------
471.6 453.1
- -------------------------------------------------------------------------------
Deferred charges 17.7 13.8
- -------------------------------------------------------------------------------
$489.3 $466.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Identifiable intangible assets are amortized over estimated useful lives of up
to 5 years for contracts and 8 to 25 years for patents and technology. Goodwill
and other intangibles are amortized primarily on a straight-line basis over 10
to 40 years.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 8
INCOME TAXES
In the first quarter of 1994, the Revenue Reconciliation Act of 1993 was signed.
This Act increased the Federal statutory income tax rate 1 percent, to 35
percent, retroactive to January 1, 1993. Additionally, in the third quarter
certain foreign (primarily German and Swedish) tax rates decreased. The net
impact of these rate changes resulted in a non-recurring tax benefit of $3.0
million related to the revaluation of deferred taxes in accordance with FAS 109,
"Accounting for Income Taxes."
In the fourth quarter of 1993, the Company adopted the
provisions of FAS 109, retroactive to July 1, 1992. The adoption of this
standard changed the Company's method of accounting for income taxes from the
deferred method to the liability method. The cumulative effect of this change at
July 1, 1992 pertaining to years prior to 1993, amounted to a charge of $16.5
million, or $.21 per share. Apart from the cumulative effect charge, the impact
of this change on 1993 continuing operations was favorable by $1.6 million, or
$.02 per share. Financial statements for 1992 were not restated. Results shown
below for 1992 were determined using the deferred method. Included in the FAS
109 adoption at July 1, 1992, were valuation allowances of $15.7 million.
Income taxes included in the Consolidated Statement of Operations were:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations $64.0 $(19.3) $74.0
- -------------------------------------------------------------------------------
Discontinued operations (2.0) (3.1) 7.3
- -------------------------------------------------------------------------------
Cumulative effect of
accounting changes 19.4
- -------------------------------------------------------------------------------
$62.0 $ (3.0) $81.3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The geographical sources of earnings (loss) from continuing operations before
income taxes were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 87.1 $(126.2) $122.4
- -------------------------------------------------------------------------------
Outside United States 84.3 (6.9) 80.4
- -------------------------------------------------------------------------------
$171.4 $(133.1) $202.8
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
The components of the income tax provision (benefit) charged (credited) to
continuing operations follow. The deferred tax provision results from
differences in the recognition of income and expense for tax and financial
reporting purposes; primarily depreciation, restructuring charges and benefit
costs.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
- -------------------------------------------------------------------------------
U.S. Federal $ 38.0 $ 15.0 $ 12.7
- -------------------------------------------------------------------------------
U.S. State and local 6.5 6.5 5.2
- -------------------------------------------------------------------------------
Outside United States 25.0 19.8 16.3
- -------------------------------------------------------------------------------
69.5 41.3 34.2
- -------------------------------------------------------------------------------
Deferred:
- -------------------------------------------------------------------------------
U.S. Federal (13.0) (57.3) 26.2
- -------------------------------------------------------------------------------
U.S. State and local .8 (2.9) 1.8
- -------------------------------------------------------------------------------
Outside United States 6.7 (.4) 11.8
- -------------------------------------------------------------------------------
(5.5) (60.6) 39.8
- -------------------------------------------------------------------------------
$ 64.0 $(19.3) $74.0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Factors causing the effective tax rate for continuing operations
to differ from the U.S. Federal statutory rate were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax at the U.S.
Federal statutory rate $60.0 $(45.3) $69.0
- -------------------------------------------------------------------------------
Statutory rate changes (3.0)
- -------------------------------------------------------------------------------
Adjustments to income
tax accruals (5.0) (5.0)
- -------------------------------------------------------------------------------
State income taxes,
net of Federal benefit 4.7 5.8 4.6
- -------------------------------------------------------------------------------
Nondeductible goodwill 2.7 3.0 3.0
- -------------------------------------------------------------------------------
Restructuring 21.7
- -------------------------------------------------------------------------------
Other items (none in
excess of 5% of
computed tax) (.4) .5 2.4
- -------------------------------------------------------------------------------
Income tax provision
(benefit) $64.0 $(19.3) $74.0
- -------------------------------------------------------------------------------
Effective tax rate 37.3% 14.5% 36.5%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The Company's effective tax rate for 1994 before the net tax benefit from the
restructuring charge and the previously discussed statutory rate changes was
38.5 percent. The 1993 effective rate before the net benefit for restructuring
and FAS 109 adoption was 36.8 percent. The favorable adjustments to income tax
accruals included in the preceding table resulted from the conclusion of income
tax audits that spanned a number of years.
The Company had the following deferred tax balances at
June 30, 1994 and 1993:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Restructuring accruals $ 97.9 $ 84.1
- -------------------------------------------------------------------------------
Employee benefits 57.6 51.6
- -------------------------------------------------------------------------------
Net operating losses 45.5 45.3
- -------------------------------------------------------------------------------
Alternative minimum tax credit 12.9 18.9
- -------------------------------------------------------------------------------
Environmental accruals 5.4 4.1
- -------------------------------------------------------------------------------
Other, net 2.4
- -------------------------------------------------------------------------------
Gross deferred tax assets 221.7 204.0
- -------------------------------------------------------------------------------
Valuation allowance (49.8) (49.9)
- -------------------------------------------------------------------------------
Total deferred tax assets 171.9 154.1
- -------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 86.7 64.5
- -------------------------------------------------------------------------------
Receivables 24.1 26.7
- -------------------------------------------------------------------------------
Intangible assets 20.2 26.7
- -------------------------------------------------------------------------------
Other, net .2
- -------------------------------------------------------------------------------
Total deferred tax liabilities 131.0 118.1
- -------------------------------------------------------------------------------
Net deferred tax assets $ 40.9 $ 36.0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
The alternative minimum tax credit of $12.9 million is available to reduce
future Federal taxes payable and has an unlimited carryforward period.
The tax benefit of the Company's net operating loss carryforwards of $45.5
million relate to its non-U.S. operations, primarily in Germany ($25.5 million
with no expiration date).
Undistributed earnings of certain subsidiaries outside the United States are
considered to be permanently invested. Accordingly, no provision for income
taxes was made for undistributed earnings of such subsidiaries which aggregated
$155.7 million at June 30, 1994.
The income tax provisions for discontinued operations reflects charges for
book and tax basis differences relative to the Company's investment in IMC
Fertilizer Group, Inc. (IFL) stock that amounted to $9.7 million in 1992.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 9
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Restructuring accruals $176.1 $147.0
- -------------------------------------------------------------------------------
Salaries, wages and bonuses 29.5 22.6
- -------------------------------------------------------------------------------
Former operations 17.3 19.1
- -------------------------------------------------------------------------------
Taxes other than income taxes 15.6 14.3
- -------------------------------------------------------------------------------
Sales promotions and incentives 9.1 16.6
- -------------------------------------------------------------------------------
Interest 8.3 7.6
- -------------------------------------------------------------------------------
Pension 7.7 9.7
- -------------------------------------------------------------------------------
Other 92.4 75.0
- -------------------------------------------------------------------------------
$356.0 $311.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 10
DEBT
The components of short-term debt were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ 72.5 $ 90.5
- -------------------------------------------------------------------------------
Notes payable 55.0 84.2
- -------------------------------------------------------------------------------
Current maturities of long-term debt 20.3 14.7
- -------------------------------------------------------------------------------
$147.8 $189.4
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The components of long-term debt were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $100.0 $190.0
- -------------------------------------------------------------------------------
9.875% debentures due in annual
installments of $15.0 million,
beginning in 2002, with final
payment of $12.8 million in 2011 134.6 134.6
- -------------------------------------------------------------------------------
8.75% promissory note due in annual
installments of $10.3 million, with
final payment of $.5 million
in 1998 31.3 51.8
- -------------------------------------------------------------------------------
7% debentures due 2013 98.5
- -------------------------------------------------------------------------------
6% notes due 2003 99.2
- -------------------------------------------------------------------------------
Other 78.7 65.9
- -------------------------------------------------------------------------------
542.3 442.3
- -------------------------------------------------------------------------------
Less current maturities 20.3 14.7
- -------------------------------------------------------------------------------
$522.0 $427.6
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
At June 30, 1994 and 1993, commercial paper totaling $100.0 million and $190.0
million respectively, has been classified as long-term debt as it is backed by
long-term lines of credit.
The 9.875% debentures are redeemable at the option of Mallinckrodt at 100
percent in 2001 and thereafter. The 7% debentures and 6% notes are not
redeemable prior to maturity.
Maturities of long-term debt for the next five years are:
1995-$20.3 million; 1996-$18.3 million; 1997-$128.7 million (includes $100.0
million of commercial paper); 1998-$19.4 million; and 1999-$1.7 million.
Financial instruments included in the Consolidated Balance Sheet were at
amounts approximating fair value at June 30, 1994. The fair value of the long-
term debt was estimated based on the current interest rates available to the
Company for debt with similar maturities and characteristics.
44
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 11
LINES OF CREDIT
The Company has a $350 million private-placement commercial paper program. This
program is backed by $450 million of U.S. lines of credit of which $350 million
is available until August 1996 and $100 million is up for renewal in August
1994. Under the terms of these agreements, interest rates are determined at the
time of borrowing and are based on London Interbank Offered Rates plus .40
percent, or other alternative rates.
Commercial paper and borrowings under the U.S. credit lines of $172.5 million
and $10.0 million, respectively, were outstanding at June 30, 1994. Non-U.S.
lines of credit totaling $218.3 million are also available and borrowings under
these lines were $45.0 million at June 30, 1994. These non-U.S. lines are
cancellable at any time.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 12
PENSION PLANS
The Company has pension plans covering substantially all its employees that
provide for retirement benefits based on years of service and the level of
compensation for the highest three to five years occurring generally within a
period of up to 10 years prior to retirement. Contributions to the U.S. plans
meet ERISA minimum funding requirements.
Pension expense for continuing operations follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 19.2 $ 17.1 $ 15.2
- -------------------------------------------------------------------------------
Interest cost on projected
benefit obligation 30.8 29.9 27.8
- -------------------------------------------------------------------------------
Earnings on plan assets (21.2) (35.0) (39.1)
- -------------------------------------------------------------------------------
Net amortization of initial
unrecognized asset and
deferral of subsequent
unrecognized net gains
and losses (7.5) 9.3 13.5
- -------------------------------------------------------------------------------
$ 21.3 $ 21.3 $ 17.4
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
U.S. pension expense in 1994, 1993 and 1992 was $18.1 million, $15.7 million
and $12.4 million, respectively.
Assumptions used in determining the actuarial present value of benefit
obligations follow:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.0% 8.5% 9.0%
- -------------------------------------------------------------------------------
Long-term rate of
return on plan assets 10.0% 10.0% 10.0%
- -------------------------------------------------------------------------------
Compensation increase rate 5.5% 6.0% 6.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The plans' assets mostly relate to U.S. plans and consist primarily of
corporate equities, U.S. government debt securities and units of participation
in a collective short-term investment fund.
The funded status of Mallinckrodt's U.S. and non-U.S. pension plans and amounts
recognized in the balance sheet follow:
<TABLE>
<CAPTION>
1994 1993
----------------------------------------- ------------------------------------------
Plans With Assets Plans With Plans With Assets Plans With
In Excess of Accumulated Benefits In Excess of Accumulated Benefits
Accumulated Benefits In Excess of Assets Accumulated Benefits In Excess of Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets at fair value $292.0 $ 41.2 $304.8 $ 29.3
- ----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
- ----------------------------------------------------------------------------------------------------------------------------------
Vested benefits 242.8 56.7 218.5 49.0
- ----------------------------------------------------------------------------------------------------------------------------------
Nonvested benefits 5.5 6.5 6.3 4.0
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 248.3 63.2 224.8 53.0
- ----------------------------------------------------------------------------------------------------------------------------------
Projected future salary increases 67.6 23.4 84.6 14.7
- ----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 315.9 86.6 309.4 67.7
- ----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (23.9) (45.4) (4.6) (38.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Items not yet recognized in earnings:
- ----------------------------------------------------------------------------------------------------------------------------------
Unrecognized net loss 28.2 7.9 7.3 4.3
- ----------------------------------------------------------------------------------------------------------------------------------
Unamortized transition (asset) liability (2.4) 12.7 (2.0) 14.3
- ----------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension liability $ 1.9 $(24.8) $ .7 $(19.8)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 13
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Mallinckrodt provides certain health care benefits for U.S. salaried and hourly
retired employees. Employees may become eligible for health care benefits if
they retire after attaining specified age and service requirements while they
worked for the Company. Health care benefits are paid directly by Mallinckrodt.
In the fourth quarter of 1993, the Company adopted FAS 106 "Employers"
Accounting for Postretirement Benefits Other Than Pensions' retroactive to July
1, 1992. This statement requires that the cost of these benefits be accrued
during the employees' working careers. The Company elected to immediately
recognize the cumulative effect of adoption rather than amortize it over future
periods. The cumulative effect of the change as of July 1, 1992, was a charge of
$63.0 million, or $.81 per share, after a deferred tax benefit of $35.3 million.
The 1993 incremental effect of FAS 106 was a charge of $7.1 million, $4.5
million after taxes, or $.06 a share. The cost of providing these benefits was
previously recognized in the period in which the benefits were paid.
Net periodic postretirement benefits expense for 1994 and 1993 consisted of
the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Service cost for benefits earned
during the year $ 3.6 $ 3.8
- -------------------------------------------------------------------------------
Interest cost on benefit obligation 10.4 10.7
- -------------------------------------------------------------------------------
$ 14.0 $ 14.5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The following table presents the plan's funded status reconciled with amounts
recognized in the Company's statement of financial postition:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation (APBO):
- -------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 94.7 $ 75.9
- -------------------------------------------------------------------------------
Active employees 56.5 46.0
- -------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets 151.2 121.9
- -------------------------------------------------------------------------------
Unrecognized net loss (26.5)
- -------------------------------------------------------------------------------
Accrued postretirement benefit cost $124.7 $121.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the APBO at June 30, 1994 and 1993, was
8.0 percent and 8.5 percent, respectively.
The assumed health care cost trend rate used in measuring the APBO at June 30,
1994 was 10.5 percent, gradually declining to 5.5 percent in 2005 and
thereafter. At June 30, 1993 a rate of 11.0 percent was used, gradually
declining to 5.5 percent in 2004 and thereafter. A one percentage point increase
in the health care cost trend rate would increase the APBO as of June 30, 1994,
by $20.6 million and the aggregate service and interest cost by $2.8 million.
The 1992 cost for these postretirement benefits on a pay-as-you-go basis was
$4.4 million, all of which was included in continuing operations.
Also in the fourth quarter of 1993, the Company adopted FAS 112 "Employers'
Accounting for Postemployment Benefits." This statement requires the accrual
method of recognizing the cost of postemployment benefits such as disability-
related benefits. The cumulative effect of adopting FAS 112 retroactively to
July 1, 1992, was a charge of $1.1 million after taxes, or $.02 per share. The
incremental effect of this change on 1993 operations was a charge of $1.4
million, $.9 million after taxes, or $.01 per share.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 14
CAPITAL STOCK
The Company has authorized and issued 100,000 shares,
98,330 outstanding at June 30, 1994, par value $100, 4 Percent Cumulative
preferred stock. This stock, with voting rights, is redeemable at the Company's
option at $110 a share. During the three years ended June 30, 1994, the number
of issued and outstanding shares did not change.
At June 30, 1994, the Company has authorized 1,400,000 shares, par value $1,
of series preferred stock, none of which is outstanding.
Each outstanding common share includes a non-voting common stock purchase
right. If a person or group acquires or has the right to acquire 20 percent or
more of the common stock or commences a tender offer for 30
percent or more of the common stock, the rights become exercisable by the holder
who may then purchase $167 worth of common stock for $83 unless, in lieu
thereof, the Board of Directors causes the exchange of each outstanding right
for one share of common stock (in either case exclusive of the rights held by
the acquiring person or group which are voided). In the event of a merger or
sale of 50 percent or more of the Company's assets, the rights may in certain
circumstances entitle the holder to purchase $167 worth of stock in the
surviving entity for $83. The rights may be redeemed by the Board at a price of
$.017 per right at any time before they become exercisable, and unless they
become exercisable, they will expire March 31, 1996.
The Board of Directors has approved a three year incentive award program for
executive officers effective July 1, 1994 which expires June 30, 1997. There are
1,000,000 common shares reserved for issuance under this plan.
46
<PAGE>
Common shares reserved at June 30, 1994, consisted of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
Exercise of common stock purchase rights 88,408,928
- -------------------------------------------------------------------------------
Exercise of stock options and granting of
stock awards 11,402,695
- -------------------------------------------------------------------------------
99,811,623
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Changes in the number of shares of common stock issued and in treasury were as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock issued 87,116,289 87,116,289 87,116,289
- -------------------------------------------------------------------------------
Treasury common stock:
Balance, beginning
of year 10,671,514 11,371,742 11,903,220
- -------------------------------------------------------------------------------
Stock options
exercised (429,645) (833,560) (1,404,262)
- -------------------------------------------------------------------------------
Purchased 19 274,267 1,029,123
- -------------------------------------------------------------------------------
(Awards) cancellations
of restricted shares (131,832) (140,935) (156,339)
- -------------------------------------------------------------------------------
Balance, end of year 10,110,056 10,671,514 11,371,742
- -------------------------------------------------------------------------------
Common stock out-
standing, end of year 77,006,233 76,444,775 75,744,547
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 15
STOCK PLANS
Three non-qualified stock option plans adopted in 1973, 1981 and 1990, as
amended, provide for granting options to purchase up to 21,817,650 shares of
common stock at prices not less than 100 percent of market price (as defined) at
the date of grant. Options under these plans are exercisable over nine years
beginning one year after the date of grant and are limited to 50 percent during
the first year of eligibility. A total of 16,901,318 shares was granted under
these plans through June 30, 1994.
Information on stock option activity follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Number of Options Price Range 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding, beginning
of year $10-40 4,883,358 4,645,812
- -------------------------------------------------------------------------------
Granted 25-38 1,363,680 1,325,749
- -------------------------------------------------------------------------------
Cancelled 10-40 (465,661) (254,643)
- -------------------------------------------------------------------------------
Exercised 10-37 (429,645) (833,560)
- -------------------------------------------------------------------------------
Outstanding, end of year 10-40 5,351,732 4,883,358
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
At June 30,
- -------------------------------------------------------------------------------
Exercisable 3,478,030 3,061,389
- -------------------------------------------------------------------------------
Reserved for future option grants 4,980,448 6,010,299
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The average exercise price of outstanding stock options at
June 30, 1994, was $30.00 a share, based on an aggregate exercise price of about
$161 million. Outstanding stock options will expire over a period ending no
later than June 13, 2004.
The 1973 non-qualified stock option and award plan also provides for the award
of restricted shares of Mallinckrodt's common stock to executive officers. Under
provisions of the plan, the grantee makes no cash payment for the award and the
shares are held in escrow until vested, with the grantee being unable to dispose
of the restricted shares until vested. Upon forfeiture of any share of
restricted stock in accordance with the stock option and award plan, or the
terms and conditions of the award, the shares would automatically be transferred
to and reacquired by the Company at no cost. In 1994 and 1993, the Company
issued from its treasury stock 131,832 and 140,935 restricted shares,
respectively. A total of 424,106 shares of restricted stock previously awarded
to executive officers vested on June 30, 1994. An additional award of 5,000
shares of restricted stock will vest on April 3, 1996.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 16
INTERNATIONAL OPERATIONS
Sales from continuing operations in the United States to
unaffiliated customers in other geographic areas were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Asia/Pacific $30.3 $17.4 $15.8
- -------------------------------------------------------------------------------
Latin America 24.6 21.1 20.7
- -------------------------------------------------------------------------------
Europe 13.5 12.4 8.4
- -------------------------------------------------------------------------------
Other 5.6 4.3 4.1
- -------------------------------------------------------------------------------
$74.0 $55.2 $49.0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
Net sales, earnings from continuing operations before income taxes, and
identifiable assets by geographic areas follow:
<TABLE>
<CAPTION>
Net Sales to
Unaffiliated Customers 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 1,223.3 $ 1,121.2 $1,106.3
- -------------------------------------------------------------------------------
Europe 384.8 353.2 317.6
- -------------------------------------------------------------------------------
Asia/Pacific 160.4 161.4 123.5
- -------------------------------------------------------------------------------
Latin America 117.1 112.3 97.0
- -------------------------------------------------------------------------------
Canada 54.5 48.2 58.5
- -------------------------------------------------------------------------------
Consolidated $ 1,940.1 $ 1,796.3 $1,702.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
Earnings
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 220.0 $ 181.9 $ 179.3
- -------------------------------------------------------------------------------
Europe 67.3 56.5 50.9
- -------------------------------------------------------------------------------
Asia/Pacific 14.6 16.4 15.9
- -------------------------------------------------------------------------------
Latin America 17.8 16.0 12.7
- -------------------------------------------------------------------------------
Canada 4.0 (.4) 2.1
- -------------------------------------------------------------------------------
Restructuring charge (93.9) (334.1)
- -------------------------------------------------------------------------------
Corporate (30.2) (35.5) (30.5)
- -------------------------------------------------------------------------------
Eliminations (6.5) (9.8) (4.9)
- -------------------------------------------------------------------------------
Operating earnings 193.1 (109.0) 225.5
- -------------------------------------------------------------------------------
Equity in pre-tax earnings
of joint venture 18.5 10.6 1.6
- -------------------------------------------------------------------------------
Interest expense, net (40.2) (34.7) (24.3)
- -------------------------------------------------------------------------------
Consolidated $ 171.4 $ (133.1) $ 202.8
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
Assets
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $1,323.2 $1,192.7 $1,152.0
- -------------------------------------------------------------------------------
Europe 740.0 605.6 504.9
- -------------------------------------------------------------------------------
Asia/Pacific 171.8 155.7 148.8
- -------------------------------------------------------------------------------
Latin America 80.6 78.6 69.1
- -------------------------------------------------------------------------------
Canada 33.3 26.1 33.5
- -------------------------------------------------------------------------------
Corporate 96.9 132.8 151.8
- -------------------------------------------------------------------------------
Eliminations (12.3) (13.9) (9.3)
- -------------------------------------------------------------------------------
Consolidated $2,433.5 $2,177.6 $2,050.8
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
Restructuring charges by region were:
- -------------------------------------------------------------------------------
<S> <C> <C>
United States $ 93.9 $ 257.9
- -------------------------------------------------------------------------------
Europe 35.4
- -------------------------------------------------------------------------------
Asia/Pacific 33.0
- -------------------------------------------------------------------------------
Latin America 7.8
- -------------------------------------------------------------------------------
$ 93.9 $ 334.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Transfers of product between geographic areas are at prices approximating
those charged to unaffiliated customers.
Net foreign exchange translation losses from businesses
in hyperinflationary economies aggregated $4.2 million, $5.8 million and $5.5
million in 1994, 1993 and 1992, respectively, and have been included in "Other
operating (income) expense, net" in the Consolidated Statement of Operations.
These translation effects were primarily from Mallinckrodt Veterinary
operations in Latin America. Translation effects for all of Mallinckrodt's
businesses were not material in the periods presented.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 17
BUSINESS SEGMENTS
The tables on page 35 show Mallinckrodt's continuing worldwide operations, which
are organized in three industry segments as follows:
MALLINCKRODT CHEMICAL
Production and sale of analgesics and medicinal narcotics used by pharmaceutical
companies; catalysts, specialty inorganics, stearates and laboratory chemicals
used by industry and research organizations. Through the Tastemaker joint
venture, the company also participates in the flavors business.
MALLINCKRODT MEDICAL
Production and sale of products used primarily in hospitals, including x-ray
contrast media, interventional products, diagnostic and therapeutic
radiopharmaceuticals, airway management products, temperature monitoring
products, and blood gas and vital sign monitoring systems.
MALLINCKRODT VETERINARY
Production and sale of pharmaceuticals, biologicals, veterinary specialties,
mineral feed supplements and other health-related products for food and
companion animals.
NONRECURRING CHARGES
Restructuring charges recorded in 1994 and 1993 are discussed in Note 1. The
impact of adopting new accounting standards in 1993 is discussed in Notes 8 and
13.
In 1992, costs associated with nonrecurring deficiencies in technical
manufacturing controls at Mallinckrodt Veterinary's Kansas City, Kansas,
manufacturing facility negatively impacted results by $4.8 million, $3.0 million
after taxes, or $.04 per share.
48
<PAGE>
Additionally, in the fourth quarter of 1992 Mallinckrodt Veterinary incurred
$12.8 million of restructuring costs. In that same quarter, adjustments were
made to certain excess accruals that were established in 1990 at the time
Mallinckrodt Veterinary acquired Coopers Animal Health. The provision for
restructuring costs was essentially offset by the accrual adjustments.
In 1993, corporate expense included charges of $5.5 million, $3.4 million
after taxes, or $.04 per share, from executive resignations resulting from the
performance of Mallinckrodt Veterinary which were reported in the Consolidated
Statement of Operations under "Selling, administrative and general expenses."
IMPACT OF ACCOUNTING CHANGES
In addition to the cumulative effect impacts, FAS 106, and to a much lesser
extent FAS 112, reduced the 1993 operating earnings of each business group and
increased corporate expense by the following amounts:
<TABLE>
<S> <C>
Mallinckrodt Chemical $3.0
- -------------------------------------------------------------------------------
Mallinckrodt Medical 3.5
- -------------------------------------------------------------------------------
Mallinckrodt Veterinary 1.6
- -------------------------------------------------------------------------------
Corporate .4
- -------------------------------------------------------------------------------
$8.5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
NOTE 18
COMMITMENTS
The Company leases office space, data processing equipment, buildings, and
machinery and equipment. Rent expense for continuing operations in 1994, 1993
and 1992 related to operating leases was $32.1 million, $29.6 million and $26.1
million, respectively.
Minimum rent commitments for continuing operations at June 30, 1994, under
operating leases with a remaining non-cancellable period exceeding one year
follow:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Years ending June 30,
- -------------------------------------------------------------------------------
<S> <C>
1995 $132.5
- -------------------------------------------------------------------------------
1996 23.9
- -------------------------------------------------------------------------------
1997 17.8
- -------------------------------------------------------------------------------
1998 15.4
- -------------------------------------------------------------------------------
1999 14.1
- -------------------------------------------------------------------------------
Later years 42.8
- -------------------------------------------------------------------------------
$146.5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The Company periodically uses forward contracts and swaps to hedge foreign
currency inventory purchase commitments, debt denominated in a foreign currency
and interest rate exposures. Gains and losses on hedge contracts are reported as
a component of the related transaction. At June 30, 1994, forward exchange
contracts with an aggregate contract value of $232.5 million were outstanding.
The difference between the recorded value of the contracts and their
June 30, 1994, market value was not material.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 19
CONTINGENCIES
The Company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. In addition, in connection with laws and regulations
pertaining to the protection of the environment, the Company is a party to
several environmental remediation investigations and clean-ups and, along with
other companies, has been named a "potentially responsible party" for certain
waste disposal sites. Each of these matters is subject to various uncertainties,
and it is possible that some of these matters will be decided unfavorably
against the Company. The Company has established accruals for matters that are
in its view probable and reasonably estimable. Based on information presently
available, management believes that existing accruals are sufficient to satisfy
any known environmental liabilities. Further, any additional liability that may
ultimately result from the resolution of these matters is not expected to have a
material effect on Mallinckrodt's business or financial condition taken as a
whole.
49
<PAGE>
- - QUARTERLY RESULTS (Unaudited)
FISCAL 1994
<TABLE>
<CAPTION>
(In millions except per share amounts) Quarter First Second Third Fourth Year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $444.9 $466.3 $486.7 $542.2 $1,940.1
- -----------------------------------------------------------------------------------------------------------------------------
Gross margins 202.4 215.3 229.5 255.6 902.8
- -----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 35.3 36.7 42.9 (7.5) 107.4
- -----------------------------------------------------------------------------------------------------------------------------
Discontinued operations (.8) (.7) (.6) (1.5) (3.6)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) 34.5 36.0 42.3 (9.0) 103.8
- -----------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends (.1) (.1) (.1) (.1) (.4)
- -----------------------------------------------------------------------------------------------------------------------------
Available for common shareholders $ 34.4 $ 35.9 $ 42.2 $ (9.1) $ 103.4
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
Continuing operations $ .45 $ .47 $ .55 $ (.10) $ 1.38
- -----------------------------------------------------------------------------------------------------------------------------
Discontinued operations (.01) (.01) (.01) (.02) (.05)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ .44 $ .46 $ .54 $ (.12) $ 1.33
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
FISCAL 1993
<TABLE>
<CAPTION>
(In millions except per share amounts) Quarter First Second Third Fourth Year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $416.8 $441.2 $439.9 $498.4 $1,796.3
- -----------------------------------------------------------------------------------------------------------------------------
Gross margins 190.8 203.3 196.5 235.1 825.7
- -----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 27.6 28.0 30.5 (199.9) (113.8)
- -----------------------------------------------------------------------------------------------------------------------------
Discontinued operations (.5) (1.5) (.9) (3.1) (6.0)
- -----------------------------------------------------------------------------------------------------------------------------
Cumulative effects of accounting changes (80.6) (80.6)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) (53.5) 26.5 29.6 (203.0) (200.4)
- -----------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends (.1) (.1) (.1) (.1) (.4)
- -----------------------------------------------------------------------------------------------------------------------------
Available for common shareholders $ (53.6) $ 26.4 $ 29.5 $(203.1) $ (200.8)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
Continuing operations $ .36 $ .36 $ .39 $ (2.59) $ (1.48)
- -----------------------------------------------------------------------------------------------------------------------------
Discontinued operations (.01) (.02) (.01) (.04) (.08)
- -----------------------------------------------------------------------------------------------------------------------------
Accounting changes (1.04) (1.04)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (.69) $ .34 $ .38 $ (2.63) $ (2.60)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
FISCAL 1994
Earnings from continuing operations included favorable tax adjustments of $1.4
million, or $.02 per share and $1.6 million, or $.02 per share, in the first and
third quarters, respectively, from recently enacted U.S. and foreign tax law
changes.
Fourth quarter earnings from continuing operations included after-tax
restructuring charges of $58.8 million, or $.76 per share.
Earnings from continuing operations without restructuring charges and
favorable tax adjustments were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Quarter First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net of taxes $33.9 $36.7 $41.3 $51.3 $163.2
- --------------------------------------------------------------------------------------------------------------
Per share $.43 $.47 $.53 $.66 $2.10
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Earnings per share for the four quarters of 1994 are less than full year per
share results by $.01 from an increase in common shares outstanding.
FISCAL 1993
Second quarter earnings from continuing operations included an after-tax charge
of $3.4 million, or $.04 per share, from executive resignations resulting from
the performance of Mallinckrodt Veterinary.
Fourth quarter continuing operations included after-tax charges of $242.2
million, or $3.13 per share.
The net after-tax charges for FAS 106,FAS 109 and FAS 112 on continuing
operations were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Quarter First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net of taxes $1.0 $1.1 $0.5 $1.2 $3.8
- --------------------------------------------------------------------------------------------------------------
Per share $.01 $.01 $.01 $.02 $.05
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning directors of the Registrant, see pages 3 through 14,
incorporated herein by reference, of Mallinckrodt's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on October 19, 1994.
Information concerning executive officers of the Registrant is included in Part
I of this report.
ITEM 11. EXECUTIVE COMPENSATION
For information concerning management remuneration, see pages 21 through 35,
incorporated herein by reference, of Mallinckrodt's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on October 19, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information concerning security ownership of certain beneficial owners and
management, see pages 11 and 12, incorporated herein by reference, of
Mallinckrodt's definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on October 19, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning certain relationships and related transactions
(including section 16(a) filings certain of which were not made on a timely
basis), see pages 9 through 11 and pages 13 and 14, incorporated herein by
reference, of Mallinckrodt's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on October 19, 1994.
51
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) (2) See index on page 65 for a listing of financial
statements and financial statement schedules filed with
this report.
(3) Exhibits filed with this report.
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
3.1 Restated Certificate of X
Incorporation of Mallinckrodt,
dated June 22, 1994.
3.2 By-Laws of Mallinckrodt as amended Exhibit 3.3
through April 18, 1990. to 1990 10-K.
4.1 Form 8-A Registration Exhibit 4.6
Statement under Section 12 to 1989 10-K.
of the Securities Exchange
Act of 1934, dated April 10,
1987 defining the rights of
holders of Mallinckrodt's 4%
Cumulative Preferred Stock
and Common Stock.
4.2 Amended and restated common Exhibit 4(b) to
stock purchase rights agreement Form 8-K dated
dated March 10, 1989. March 10, 1989.
52
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
4.3 Second amendment to the common Exhibit 6 to
stock purchase rights agreement Form 8 dated
dated April 17, 1991. April 18, 1991.
4.4(a) Indenture dated as of March 15, Exhibit 4
1985, between Mallinckrodt and to Form S-3
Morgan Guaranty Trust Company Registration
of New York pursuant to which Statement
$150 million 9-7/8% Sinking No. 2-96566.
Fund Debentures due March 15,
2011 were issued.
4.4(b) First Supplemental Indenture dated Exhibit 4.2
as of April 1, 1992 between to Form S-3
Mallinckrodt and Morgan Guaranty Registration
Trust Company of New York pursuant Statement No.
to which $100 million 6% Notes due 33-47081
October 15, 2003, and $100 million
7% Debentures due December 15, 2013
were issued.
4.5 Form 8-A Registration Statement X
under Section 12 of the Securities
Exchange Act of 1934, dated May 6,
1994 regarding $100 million 6%
Notes due October 15, 2003, and
$100 million 7% Debentures due
December 15, 2013.
10.1(a) Contingent Employment Agreement Exhibit 10.1(c)
with C. Ray Holman dated to 1991 10-K.
April 1, 1987.(1)
10.1(b) Contingent Employment Agreement Exhibit 10.1(b)
with William J. Mercer dated to 1993 10-K.
March 9, 1990.(1)
10.1(c) Contingent Employment Agreement Exhibit 10.1(c)
with Robert G. Moussa dated to 1993 10-K.
April 19, 1990.(1)
53
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.1(d) Contingent Employment Agreement Exhibit 10.1(f)
with Mack G. Nichols dated to 1991 10-K.
April 1,1987.(1)
10.1(e) Contingent Employment Agreement X
with Beverley L. Hayes
dated March 7, 1990.(1)
10.2 Mallinckrodt Executive Life Exhibit 10.2
Insurance Program adopted to 1989 10-K.
May 20, 1987.(1)
10.3 Restated Mallinckrodt Executive Exhibit 10.3
Long-Term Disability Plan to 1989 10-K.
effective January 1, 1987.(1)
10.4(a) Agreement with Exhibit 10.4(a)
George D. Kennedy dated to 1991 10-K.
December 17, 1990.(1)
10.4(b) Amendment dated June 16, 1993 Exhibit 10.4(b)
to Agreement with George to 1993 10-K.
D. Kennedy dated December
17, 1990 described in
Exhibit 10.4(a).(1)
10.5(a) Supplemental Benefit Plan for Exhibit 10.6(a)
Participants in the Mallinckrodt to 1989 10-K.
Retirement Plan as amended
and restated effective
January 1, 1980.(1)
54
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.5(b) Amendment No. 1 dated June 20, Exhibit 10.6(b)
1989 to Supplemental Benefit to 1989 10-K.
Plan for Participants in the
Retirement Plan for Salaried
Employees of Mallinckrodt.(1)
10.5(c) Amendment No. 2 dated April 20, Exhibit 10.6(c)
1990 to Supplemental Benefit to 1990 10-K.
Plan for Participants in the
Mallinckrodt Retirement Plan.(1)
10.6(a) Mallinckrodt Supplemental Executive Exhibit 10.7(a)
Retirement Plan restated to 1989 10-K.
effective April 19, 1988.(1)
10.6(b) Amendment No. 1 effective Exhibit 10.7(c)
December 6, 1989, to to 1990 10-K.
Supplemental Executive
Retirement Plan.(1)
10.7(a)(i) Gross-Up Agreement with Exhibit 10.7(a)
C. Ray Holman dated to 1993 10-K.
July 1, 1992 and Amendment
dated April 30, 1993.(1)
10.7(a)(ii) Amendment No. 2 to Gross-Up X
Agreement with C. Ray Holman
dated September 1, 1993.(1)
55
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.7(b)(i) Gross-Up Agreement with Exhibit 10.7(b)
William J. Mercer dated to 1993 10-K.
July 1, 1992 and Amendment
dated April 30, 1993.(1)
10.7(b)(ii) Amendment No. 2 to Gross-Up X
Agreement with William J. Mercer
dated September 1, 1993.(1)
10.7(c)(i) Gross-Up Agreement with Exhibit 10.7(c)
Robert G. Moussa dated to 1993 10-K.
April 22, 1993.(1)
10.7(c)(ii) Amendment No. 2 to Gross-Up X
Agreement with Robert G. Moussa
dated September 1,1993.(1)
10.7(d)(i) Gross-Up Agreement with Exhibit 10.7(d)
Mack G. Nichols dated to 1993 10-K.
July 1, 1992.(1)
10.7(d)(ii) Amendment No. 2 to Gross-Up X
Agreement with Mack G. Nichols
dated September 1, 1993.(1)
56
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.7(e) Gross-Up Agreement with X
Beverley L. Hayes
dated July 1, 1992 and
Amendment dated September 1, 1993.(1)
10.8 Mallinckrodt Management Incentive Exhibit 10.9(b)
Compensation Program as to 1991 10-K.
amended and restated
effective July 1, 1991.(1)
10.9(a) Mallinckrodt 1973 Stock Option Post-Effective
and Award Plan as amended Amendment
effective February 21, 1990.(1) No. 1 to
Form S-8
Registration
Statement
No. 33-32109.
10.9(b) Amendment No. 1 to the Mallinckrodt Form S-8
1973 Stock Option and Award Registration
Plan dated June 19, 1991.(1) Statement No.
33-43925
10.10 Mallinckrodt Directors Retirement Exhibit 10.10
Services Plan as amended and to 1993 10-K.
restated effective April 21,
1993.(1)
10.11(a) Mallinckrodt 1981 Stock Option Post-Effective
Plan as amended through Amendment No. 3
April 19, 1988.(1) to Form S-8
Registration
Statement
No. 2-80553.
57
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.11(b) Amendment to the 1981 Exhibit 10.12(b)
Stock Option Plan effective to 1989 10-K.
February 15, 1989.(1)
10.11(c) Amendment to the 1981 Exhibit 10.12(c)
Stock Option Plan effective to 1991 10-K.
June 19, 1991.(1)
10.12(a) Intercorporate Agreement dated Exhibit 10.1 to
as of July 1, 1987 by and IMC Fertilizer
between Mallinckrodt and IMC Group, Inc.'s
Fertilizer Group, Inc. with Form S-1
Exhibits, including the Registration
Restated Certificate of Statement
Incorporation of IMC Fertilizer No. 33-17091.
Group, Inc., as amended; By-Laws
of IMC Fertilizer Group, Inc.;
Preliminary Agreement for K-2
Advances; Registration Rights
Agreement; Services Agreement;
Management Services Agreement;
Agreement regarding Pollution
Control and Industrial Revenue
Bonds; License Agreement;
office lease and sublease;
management agreements; supply
agreements; and transportation
service agreements.
10.13(a) Note Agreement with The Exhibit 10.13(a)
Prudential Insurance Company to 1992 10-K.
of America dated as of
February 1, 1980.
58
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.13(b) Agreement dated June 3, 1981, Exhibit 10.14(b)
consolidating obligation in to 1990 10-K.
Loan Agreement dated April 18,
1973, under Note Agreement
dated as of February 1, 1980.
10.13(c) Amendment dated June 15, Exhibit 10.14(d)
1989, to Note Agreement to 1989 10-K.
with Prudential Insurance
Company of America dated
as of February 1, 1980.
10.13(d) Amendment dated April 18, 1991 Exhibit 10.14(e)
to Note Agreement with to 1991 10-K.
Prudential Insurance Company
of America dated as of
February 1, 1980 as amended.
10.13(e) Amendment dated June 2, 1992 Exhibit 10.13(c)
to Note Agreement with to 1992 10-K.
Prudential Insurance Company
of America dated as of
February 1, 1980 as amended.
10.13(f) Amendment dated July 20, 1993 Exhibit 10.13(f)
to Note Agreement with to 1993 10-K.
Prudential Insurance Company
of America dated as of
February 1, 1980 as amended.
10.14 Management Compensation and Exhibit 10.30
Benefit Assurance Program.(1) to 1988 10-K.
59
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.15 Form of Trust Agreement dated Exhibit 10.31
June 7, 1988, between Mallinckrodt to 1988 10-K.
and Wachovia Bank & Trust of
North Carolina, N.A., incident
to the program in Exhibit
10.15, for Mallinckrodt's 1973 Stock
Option and Award Plan, 1981
Stock Option Plan, Long-Term
Performance Incentive Plan,
Supplemental Executive
Retirement Plan, Contingent
Employment Agreements,
Gross-Up of Excise Tax
Agreement, and Management
Incentive Compensation Plan.(1)
10.16(a) Letter of Credit Agreement Exhibit 10.32
dated May 31, 1988, between to 1988 10-K.
Mallinckrodt and a group of banks
providing the means of
funding the trusts described
in Exhibit 10.15.(1)
10.16(b) Amendment and Assumption Exhibit 10.17(c)
Agreements to the Letter of to 1991 10-K.
Credit Agreement described
in Exhibit 10.16(a) dated
June 22, 1991.(1)
10.17(a) Corporate Staff Employee Exhibit 10.33
Severance and Benefit to 1988 10-K.
Assurance Policy.(1)
60
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.17(b) Form of letter sent to Exhibit 10.18(b)
participants in Mallinckrodt's to 1989 10-K.
Corporate Staff Employee
Severance and Benefit
Assurance Program.(1)
10.18 Supplemental Life Plan Exhibit 10.20
of Mallinckrodt, Inc. to 1989 10-K.
effective July 15, 1984.(1)
10.19(a) Employment Agreement dated Exhibit 10.19(a)
February 17, 1993 to 1993 10-K.
with C. Ray Holman.(1)
10.19(b) Employment Agreement dated Exhibit 10.19(b)
February 17, 1993 to 1993 10-K.
with William J. Mercer.(1)
10.19(c) Employment Agreement dated Exhibit 10.19(c)
February 17, 1993 with to 1993 10-K.
Robert G. Moussa.(1)
10.19(d) Employment Agreement dated Exhibit 10.19(d)
February 17, 1993 with to 1993 10-K.
Mack G. Nichols.(1)
10.21 Mallinckrodt Directors' Stock Exhibit 4(a)
Option Plan effective to Form S-8
October 17, 1990.(1) Registration
Statement
No. 33-40246.
61
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.22 Mallinckrodt Long-Term Incentive Exhibit 10.24
Plan for Senior Management to 1991 10-K.
effective July 1, 1991.(1)
10.23 Mallinckrodt Long-Term Incentive Exhibit 10.25
Plan for Key Middle Managers to 1991 10-K.
effective June 18, 1991.(1)
10.24 Consultancy Agreement X
with Herve M. Pinet for
the period December 1, 1993, to
November 30, 1994.
10.25(a) Consulting Agreement with Exhibit 10.27
Ronald G. Evens, M.D., for to Amendment
the period from January 1, 1987, No. 1 to
through December 31, 1989; 1992 10-K.
extended for the calendar
years 1990, 1991 and 1992.(1)
62
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
10.25(b) Amendment dated December 17, 1992 Exhibit 10.26(b)
to Consulting Agreement with to 1993 10-K.
Ronald G. Evens, M.D., described
in Exhibit 10.26(a).(1)
10.26 Credit Agreement dated Exhibit 10.27
August 13, 1993, between to 1993 10-K.
Mallinckrodt and
The Chase Manhattan Bank,
individually and as an
agent for the banks,
($350 million facility).
10.27 Credit Agreement dated Exhibit 10.28
August 13, 1993 between to 1993 10-K.
Mallinckrodt and The Chase
Manhattan Bank, individually and
as an agent for the banks,
($100 million facility).
10.28 Offering Memorandum by Exhibit 10.29
J.P. Morgan for sale of to 1993 10-K.
the commercial paper (CP)
notes of Mallinckrodt.
The CP program is backed
by credit agreements
included at 10.27 and 10.28.
10.29 Deferral Election Plan for X
Non-Employee Directors, effective
June 30, 1994.(1)
10.30 Long-Term Incentive Compensation X
Plan, effective July 1, 1994.(1)
63
<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description Reference to Submission
- --------------------------------------------------------------------------------
11.1 Primary earnings per share X
computation for the three
years ended June 30, 1994.
11.2 Fully diluted earnings X
per share computation for the
three years ended June 30, 1994.
21 Subsidiaries of the Registrant. X
23.1 Consent of Ernst & Young LLP. X
27 Financial data schedule for the X
year ended June 30, 1994.
(1) Management contract or compensatory plan required to be filed
pursuant to Item 601 of Regulation S-K.
(b) Reports on Form 8-K
During the quarter and through the date of this report, the
following reports on Form 8-K were filed.
- Report dated June 15, 1994, under Item 5 regarding
restructuring program.
- Report dated July 21, 1994, under Item 5 regarding the
resignation of the President of Mallinckrodt Veterinary,
Inc.
- Report dated August 25, 1994, under Item 5 regarding
repurchase of Company stock.
- Report dated September 7, 1994, under Item 5 regarding
Mallinckrodt Medical's decision to relocate tracheal tube
manufacturing operations.
64
<PAGE>
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA,
AND FINANCIAL STATEMENT SCHEDULES
Page References
---------------
Consolidated Balance Sheet at June 30, 1994 and 1993 . . . . . . . . . . . 37
For the years ended June 30, 1994, 1993 and 1992:
Information by Business Segment . . . . . . . . . . . . . . . . . . . . . 35
Consolidated Statement of Operations. . . . . . . . . . . . . . . . . . . 36
Consolidated Statement of Cash Flows. . . . . . . . . . . . . . . . . . . 38
Consolidated Statement of Changes in Shareholders' Equity . . . . . . . . 39
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 40-49
Quarterly Results (Unaudited). . . . . . . . . . . . . . . . . . . . . . . 50
Consolidated financial statement schedules for years ended
June 30, 1994, 1993 and 1992:
II - Amounts receivable from related parties and
underwriters, promoters and employees other
than related parties . . . . . . . . . . . . . . . . . . . . . . . 69
V - Property, plant and equipment. . . . . . . . . . . . . . . . . . . 70-72
VI - Accumulated depreciation and amortization
of property, plant and equipment . . . . . . . . . . . . . . . . . 73
IX - Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . 74
X - Supplementary income statement information . . . . . . . . . . . . 75
___________________
All other schedules are omitted as the required information is not present in
sufficient amounts or the required information is included in the consolidated
financial statements or notes thereto.
Financial statements and schedules and summarized financial information of 50
percent or less owned persons are omitted, as none of such persons are
individually or in the aggregate significant under the tests specified in
Regulation S-X under Article 3.09 of general instructions to the financial
statements.
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Mallinckrodt Group Inc.
- -----------------------
(Registrant)
By: MICHAEL A. ROCCA By: WILLIAM B. STONE
------------------- --------------------
Michael A. Rocca William B. Stone
Senior Vice President and Vice President and Controller
Chief Financial Officer
Date: September 23, 1994
66
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Title Date
- --------------------- ------------------- ----------------------
C. RAY HOLMAN
- ---------------------
C. Ray Holman President, Chief September 23, 1994
Executive Officer
and Director
MICHAEL A. ROCCA
- ---------------------
Michael A. Rocca Senior Vice President September 23, 1994
and Chief Financial
Officer
WILLIAM B. STONE
- ---------------------
William B. Stone Vice President and September 23, 1994
Controller (Chief
Accounting Officer)
RAYMOND F. BENTELE
- ---------------------
Raymond F. Bentele Director September 23, 1994
RONALD G. EVENS
- ---------------------
Ronald G. Evens Director September 23, 1994
LOUIS FERNANDEZ
- ---------------------
Louis Fernandez Director September 23, 1994
67
<PAGE>
Signature Title Date
- ---------------------- ----------------- ----------------------
ALEC FLAMM
- ----------------------
Alec Flamm Director September 23, 1994
ROBERTA S. KARMEL
- ----------------------
Roberta S. Karmel Director September 23, 1994
GEORGE D. KENNEDY
- ----------------------
George D. Kennedy Director September 23, 1994
CLAUDINE B. MALONE
- ----------------------
Claudine B. Malone Director September 23, 1994
MORTON MOSKIN
- ----------------------
Morton Moskin Director September 23, 1994
HERVE M. PINET
- ----------------------
Herve M. Pinet Director September 23, 1994
BRIAN M. RUSHTON
- ----------------------
Brian M. Rushton Director September 23, 1994
DANIEL R. TOLL
- ----------------------
Daniel R. Toll Director September 23, 1994
68
<PAGE>
Schedule II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Years Ended June 30, 1992, 1993 and 1994
($ in thousands)
<TABLE>
<CAPTION>
Balance at End
Deductions of Period
Balance at ---------- -------------------
Beginning Amounts Non
Name of Debtor of Period Additions Collected Current Current
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
U.S. Employee relocation loans (A) $1,252 $412 $911 $408 $345
Number of loans 31 18 30 18 1
U.K. employee relocation loans (A) 1,231 156 823 564
Number of loans 9 7 3 13
- ---------------------------------------------------------------------------------------------------
1993
U.S. Employee relocation loans (A) $753 $960 $416 $757 $540
Number of loans 19 17 20 14 2
U.K. employee relocation loans (A) 564 18 402 180
Number of loans 13 1 3 11
- ---------------------------------------------------------------------------------------------------
1994
U.S. Employee relocation loans (A) $1,297 $1,806 $798 $2,055 $250
Number of loans 16 27 18 23 2
U.K. employee relocation loans (A) 180 63 72 171
Number of loans 11 2 3 10
- ---------------------------------------------------------------------------------------------------
<FN>
(A) Generally non-interest bearing and repayable upon the sale of the employee's
former residence.
</TABLE>
69
<PAGE>
Schedule V
(Page 1 of 3)
PROPERTY, PLANT AND EQUIPMENT
Years Ended June 30, 1992, 1993 and 1994
($ in millions)
<TABLE>
<CAPTION>
Balance Other Balance
at Beginning of Additions Changes at End of
Period at Cost Retirements Add (Deduct) Period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
Land $64.1 $1.0 $.6 $(1.8) (A)
1.1 (C)
(.8) (E) $63.0
Building and leasehold
improvements 229.8 13.8 4.5 6.6 (A)
.1 (B)
6.3 (C)
(13.1) (E) 239.0
Machinery and equipment 591.0 76.8 22.3 5.9 (A)
1.0 (B)
8.8 (C)
(17.9) (E) 643.3
Construction in progress 59.6 58.8 (10.6) (A)
.1 (B)
4.2 (C)
(2.8) (E) 109.3
- -------------------------------------------------------------------------------------------------------
$944.5 $150.4 $27.4 $(12.9) $1,054.6
- -------------------------------------------------------------------------------------------------------
</TABLE>
See explanation of notes on page 3 of 3.
70
<PAGE>
Schedule V
(Page 2 of 3)
PROPERTY, PLANT AND EQUIPMENT
Years Ended June 30, 1992, 1993 and 1994
($ in millions)
<TABLE>
<CAPTION>
Balance Other Balance
at Beginning of Additions Changes at End of
Period at Cost Retirements Add (Deduct) Period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Land $63.0 $4.1 $.2 $3.1 (A)
.1 (B)
(2.6) (C) $67.5
Building and leasehold
improvements 239.0 31.1 2.3 11.1 (A)
2.2 (B)
(11.0) (C) 270.1
Machinery and equipment 643.3 76.0 39.3 17.1 (A)
13.6 (B)
(15.1) (C)
(.1) (F) 695.5
Construction in progress 109.3 77.1 (19.2) (A)
1.2 (B)
(7.3) (C)
(1.3) (F) 159.8
- -------------------------------------------------------------------------------------------------------
$1,054.6 $188.3 $41.8 $(8.2) $1,192.9
- -------------------------------------------------------------------------------------------------------
</TABLE>
See explanation of notes on page 3 of 3
71
<PAGE>
Schedule V
(Page 3 of 3)
PROPERTY, PLANT AND EQUIPMENT
Years Ended June 30, 1992, 1993 and 1994
($ in millions)
<TABLE>
<CAPTION>
Balance Other Balance
at Beginning of Additions Changes at End of
Period at Cost Retirements Add (Deduct) Period
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Land $67.5 $4.6 $.1 $(3.2) (A)
1.1 (B)
.6 (C)
(1.2) (G) $69.3
Building and leasehold 270.1 49.7 2.7 30.4 (A)
improvements 5.7 (B)
(.3) (C) 352.9
Machinery & Equipment 695.5 117.4 23.1 22.2 (A)
51.2 (B)
9.2 (C) 872.4
Construction in progress 159.8 .6 (51.4) (A)
1.2 (B)
2.2 (C)
(11.0) (G) 101.4
- -------------------------------------------------------------------------------------------------------
$1,192.9 $172.3 $25.9 $56.7 $1,396.0
- -------------------------------------------------------------------------------------------------------
<FN>
Notes for Schedule V
(A) Transfers between accounts and reclassifications from other balance sheet
accounts.
(B) Purchases of businesses.
(C) Foreign currency adjustment.
(E) Reclassification for Tastemaker joint venture.
(F) Write-offs related to 1993 restructuring charges.
(G) Reclassification among accounts.
</TABLE>
72
<PAGE>
Schedule VI
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
Years Ended June 30, 1992, 1993 and 1994
($ in millions)
<TABLE>
<CAPTION>
Additions
Balance Charged to Other Balance
at Beginning of Cost and Changes at End of
Period Expenses Retirements Add(Deduct) Period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
Building and leasehold
improvements $55.8 $11.6 $2.6 $.9 (B)
(2.4) (C)
.9 (E) $64.2
Machinery and equipment 258.5 58.8 15.7 3.5 (B)
(7.0) (C)
.2 (E) 298.3
- -------------------------------------------------------------------------------------------------------
$314.3 $70.4 $18.3 $(3.9) $362.5
- -------------------------------------------------------------------------------------------------------
1993
Building and leasehold
improvements $64.2 $12.8 $1.9 $(1.5) (B)
26.6 (D)
4.9 (E) $105.1
Machinery and equipment 298.3 61.9 23.9 (5.7) (B)
58.2 (D)
.1 (E) 388.9
- -------------------------------------------------------------------------------------------------------
$362.5 $74.7 $25.8 $82.6 $494.0
- -------------------------------------------------------------------------------------------------------
1994
Building and leasehold
improvements $105.1 $15.1 $1.5 $(1.2) (A)
1.7 (B)
(1.2) (E) $118.0
Machinery and equipment 388.9 64.3 22.4 (8.5) (A)
3.5 (B)
(11.0) (E) 414.8
- -------------------------------------------------------------------------------------------------------
$494.0 $79.4 $23.9 $(16.7) $532.8
- -------------------------------------------------------------------------------------------------------
<FN>
Notes
(A) Transfers between accounts and reclassifications from other balance sheet
accounts.
(B) Foreign currency adjustment.
(C) Reclassification for Tastemaker joint venture.
(D) Write-off related to 1993 restructuring charges.
(E) Reclassification among accounts.
</TABLE>
73
<PAGE>
Schedule IX
SHORT-TERM BORROWINGS
Years Ended June 30, 1994, 1993 and 1992
($ in millions)
<TABLE>
<CAPTION>
Maximum Average Weighted
Amount Amount Average
Out- Out- Interest
Balance Weighted standing standing Rate
at End Average During During During
of Interest the the the
Period Rate Period Period Period
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks (A)
1994 $ 55.0 6.5% $ 89.0 $ 68.7 6.7%
1993 $ 84.2 6.3% $145.8 $106.4 5.1%
1992 $ 96.2 8.3% $ 96.2 $ 76.5 10.5%
Commercial paper (B)
1994 $172.5 3.9% $308.3 $211.6 3.9%
1993 $280.5 3.4% $331.6 $161.7 3.4%
<FN>
The average amount outstanding for each period was computed by averaging the
daily balances during the year.
The weighted average interest rate for each period was computed by dividing
interest on short-term borrowings by the average amount outstanding during the
year.
(A) Primarily foreign banks.
(B) No commercial paper was issued in 1992. Amounts for 1994 and 1993 include
commercial paper borrowings aggregating $100.0 million and $190.0,
respectively, which have been classified as long-term debt as it is backed
by long-term lines of credit.
</TABLE>
74
<PAGE>
Schedule X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended June 30, 1994, 1993, and 1992
($ in millions)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
-----------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $56.6 $44.6 $41.2
------ ------ ------
------ ------ ------
Amortization of intangible assets $25.1 $21.4 $18.9
------ ------ ------
------ ------ ------
Taxes, other than payroll and income taxes $26.3 $24.3 $24.4
------ ------ ------
------ ------ ------
Advertising $35.1 $41.7 $42.2
------ ------ ------
------ ------ ------
Royalties $20.4 $13.9 $11.2
------ ------ ------
------ ------ ------
</TABLE>
75
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
MALLINCKRODT GROUP INC.
_______
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
Pursuant to Section 807 of the Business Corporation Law, the undersigned
hereby certify:
I. That the name of the corporation is Mallinckrodt Group Inc. and the name
under which it was formed is International Agricultural Corporation.
II. That the Certificate of Incorporation of the corporation (under the
name of International Agricultural Corporation) was originally filed under the
Business Corporation Law of the State of New York by the Department of State,
Albany, New York on the 14th day of June, 1909.
III. That Article Fourth of the Certificate of Incorporation of
Mallinckrodt Group Inc. is hereby amended to change the address to which the
secretary of state shall mail a copy of any process against the corporation
served upon him.
IV. That the above-described amendment to the Certificate of Incorporation
was authorized by vote of the board of directors of the corporation without a
vote of the shareholders, as authorized by Section 803(b)(2) of the Business
Corporation Law.
V. That the text of the Certificate of Incorporation of said Mallinckrodt
Group Inc. is hereby restated as amended to read as herein set forth in full:
CERTIFICATE OF INCORPORATION
of
Mallinckrodt Group Inc.
We, the undersigned, all being persons of full age and at least two-thirds
being citizens of the United States and at least one of us a resident of the
State of New York, desiring to form a stock corporation pursuant to the Business
Corporation Law of the State of New York, do hereby make, sign, acknowledge and
file this certificate for that purpose, as follows:
FIRST: The name of the corporation is
Mallinckrodt Group Inc.
<PAGE>
SECOND: The purposes of the Corporation are as follows:
1. To manufacture, mine, extract, process, construct, develop,
assemble, and produce in any way, to sell, lease, supply, export, import,
and store, transport, distribute, market or dispose of in any way, to
purchase, lease, and acquire in any way, to own, operate, experiment with,
deal or trade in, finance, provide services for or in respect of, and use
in any way minerals, metals, chemicals, fertilizers, foods, beverages,
timber and other forestry products, energy sources, materials, equipment,
apparatus, appliances, devices, structures, facilities, processes,
information, tangible and intangible property, services and systems of
every kind, nature and description, in any part of the world for any
application or purpose whatsoever, including but not limited to industrial,
mining, agricultural, consumer, defense, governmental, scientific,
educational, cultural, financial, recreational, transportation,
construction, publication, and communication applications or purposes.
2. To conduct studies and research and development, and to engage in
any other activity relating to the development, application and
dissemination of information concerning science, technology, and other
fields of endeavor.
3. To acquire by purchase, lease, subscription or otherwise all or
any part of any interest in the property, good will, business, franchises
or assets of any corporation, association, firm or individual and undertake
either wholly or in part the liabilities of any corporation, association,
firm or individual and to take up any business as a going concern or
otherwise (a) by purchase of the assets thereof wholly or in part; (b) by
acquisition of the capital stock or any part thereof; or (c) in any other
manner, and to pay for the same in cash or in the stock or bonds of the
Corporation or otherwise; to hold, maintain and operate, or in any manner
deal in or dispose of the whole or any part of any interest in the
property, good will, business, franchises, or assets so acquired, and to
conduct in any lawful manner the whole or any part of any business so
acquired; and without limiting the generality of the foregoing, to apply
for, acquire, hold and operate under or to dispose of, mining and
prospecting permits or leases from any government anywhere in the world or
from any department or authority of any thereof.
4. To do any and all of the things herein set forth to the same
extent as natural persons might or could do and in any part of the world,
as principals, agents, contractors, or otherwise; and in general, to engage
in any part of the world, directly or indirectly, in any activity which may
promote the interests of the Corporation, or enhance the value of its
property to the fullest extent permitted by applicable law, and in
furtherance of the foregoing purposes, to exercise all powers now or
hereafter granted or permitted by applicable law, including the powers
specified in the New York Business Corporation Law.
The foregoing clauses shall be construed as objects and powers as well
as purposes, and it is hereby expressly provided that enumeration herein of
specific purposes, objects and powers shall not be held to limit or
restrict in any way the general powers of the Corporation.
THIRD: The aggregate number of shares which the Corporation shall have
authority to issue is 301,500,000 divided into 100,000 shares of 4% Cumulative
Preferred Stock of the par value of $100 per share (hereinafter called
"Preferred Stock"), 1,400,000 shares of Series Preferred Stock of the par value
of $1 per share (hereinafter called "Series Preferred Stock") and 300,000,000
shares of Common Stock of the par value of $1 per share (hereinafter called
"Common Stock"). All of such shares shall be issued as full-paid and
non-assessable shares, and the holders thereof shall not be liable for any
further payments in respect thereto.
The Series Preferred Stock shall rank subordinate to the Preferred Stock in
respect of the payment of dividends and on any distribution upon dissolution,
liquidation or winding up of the Corporation, and in respect of the rights of
the Preferred Stock.
A statement of the designations, preferences, privileges and voting powers
of the shares of each class and the restrictions and qualifications thereof
shall be as follows:
-2-
<PAGE>
(a) PREFERRED STOCK
1. DIVIDENDS: The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of the assets
or funds of the Corporation legally available therefor, dividends at the
fixed rate of four percent (4%) per annum and no more, payable quarterly on
the thirtieth day of March, June, September and December of each year (the
periods between such dates, commencing on such dates, being herein
designated as "dividend periods"). Dividends on the Preferred Stock shall
be cumulative from and after the first day of April, 1942. Such dividends
on the Preferred Stock shall be declared and paid or set apart for payment
before any dividends shall be declared or paid or set apart for payment on
the Series Preferred Stock or the Common Stock and shall be cumulative as
above provided, so that if in any quarterly dividend period dividends at
the rate of four percent (4%) per annum shall not have been declared and
paid or set apart for payment on all outstanding shares of Preferred Stock
for such quarterly dividend period and all preceding quarterly dividend
periods from and after the first day of the quarterly dividend period from
which dividends are cumulative, then the aggregate deficiency shall be
declared and fully paid or set apart for payment, but without interest,
before any dividends shall be declared or paid or set apart for payment on
the Series Preferred Stock or the Common Stock.
After full cumulative dividends on all shares of Preferred Stock
outstanding shall have been declared and paid or set apart for payment for
all previous dividend periods and for the current quarterly dividend
period, as above provided, then, and not otherwise so long as any shares of
the Preferred Stock shall remain outstanding, dividends may be declared and
paid or set apart for payment on the Series Preferred Stock and the Common
Stock out of the assets or funds of the Corporation legally available
therefor.
2. VOTING RIGHTS: The holders of the Preferred Stock shall be entitled
to one vote for each share held. So long as the Preferred Stock shall be
outstanding, the Corporation shall not, without the affirmative vote or
written consent of the holders of at least two-thirds (2/3) thereof, amend
the Certificate of Incorporation of the Corporation in such manner as to
alter or change the preferences, special rights or powers of the Preferred
Stock so as to affect such class of stock adversely, or to increase or
decrease the amount of the authorized stock of such class or to increase or
decrease the par value thereof. At any time when six (6) quarterly
dividends on such Preferred Stock shall be in default, the holders of the
Preferred Stock at such time or times outstanding shall be entitled, at the
next annual meeting of stockholders for the election of directors, and
until payment in full of all such dividends then in default, or provision
therefor by the declaration and setting aside thereof, voting as a class,
to the exclusion of the holders of the Common Stock and the holders of the
Series Preferred Stock to vote for and elect two members of the Board of
Directors of the Corporation; and, subject to any voting rights with
respect to any series of Series Preferred Stock, the holders of the Common
Stock, voting as a class, to the exclusion of the holders of Preferred
Stock, shall be entitled to vote for and elect the balance of the Board of
Directors. Directors elected by any class of stock voting separately as a
class, may be removed only by a majority vote of such class, voting
separately as a class, so long as the voting power of such class shall
continue.
3. LIQUIDATION: The holders of the Preferred Stock, upon any
dissolution, liquidation or winding up of the Corporation, will be entitled
to receive, out of the assets and funds of the Corporation, whether from
capital or surplus, if such dissolution, liquidation or winding up be
voluntary, $110 per share, or if such dissolution, liquidation or winding
up be involuntary, $100 per share, in either case with an amount equal to
all accrued and unpaid dividends, before any distribution is made to the
holders of Series Preferred Stock or the Common Stock.
If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
insufficient to permit the payment in full of the amounts payable as
aforesaid to the holders of the Preferred Stock, then, to the exclusion of
the holders of the Series Preferred Stock and the holders of the Common
Stock, the holders of the Preferred Stock shall share ratably, in
proportion to the amounts which they are respectively entitled to receive
in such event, in the distribution of assets, according to the number of
shares of Preferred Stock which they respectively hold.
-3-
<PAGE>
4. REDEMPTION: The Preferred Stock shall be subject to redemption in
whole or in part at any time and from time to time at the option of the
Corporation upon payment of $110 per share and in addition thereto a sum
equal to all accrued and unpaid dividends thereon to the date fixed for
redemption, provided, however, that a notice specifying the shares to be
redeemed, and the time and place of redemption (and, if less than the total
outstanding shares are to be redeemed, specifying the certificate numbers
and number of shares to be redeemed) shall be published once in a daily
newspaper printed in the English language and published and of general
circulation in the Borough of Manhattan, the City of New York, and shall be
mailed, addressed to the holders of record of the Preferred Stock to be
redeemed at their respective addresses as the same shall appear upon the
books of the Corporation, not less than thirty (30) days previous to the
date fixed for redemption. If less than the whole amount of outstanding
Preferred Stock is to be redeemed, the shares to be redeemed shall be
selected by lot or pro rata in any manner determined by resolution of the
Board of Directors to be fair and proper. From and after the date fixed in
any such notice as the date of redemption (unless default shall be made by
the Corporation in providing moneys at the time and place of redemption for
the payment of the redemption price) all dividends upon the Preferred Stock
so called for redemption shall cease to accrue, and all rights of the
holders of said Preferred Stock as stockholders of the Corporation, except
the right to receive the redemption price upon surrender of the
certificates representing the Preferred Stock so called for redemption,
duly endorsed for transfer, if required, shall cease and determine. With
respect to any shares of Preferred Stock so called for redemption, if,
before the redemption date, the Corporation shall deposit with a bank or
trust company in the Borough of Manhattan, City of New York, having a
capital and surplus of at least $5,000,000 funds necessary for such
redemption, in trust, to be applied to the redemption of the shares of
Preferred Stock so called for redemption, then from and after the date of
such deposit, all rights of the holders of such shares of Preferred Stock,
so called for redemption, shall cease and determine, except the right to
receive, on and after the redemption date, the redemption price upon
surrender of the certificates representing such shares of Preferred Stock,
so called for redemption, duly endorsed for transfer, if required. Any
interest accrued on such funds shall be paid to the Corporation from time
to time. Any funds so deposited and unclaimed at the end of six (6) years
from such redemption date shall be released or repaid to the Corporation,
after which the holders of such shares of Preferred Stock so called for
redemption shall look only to the Corporation for payment of the redemption
price.
(b) SERIES PREFERRED STOCK
1. BOARD AUTHORITY: The Series Preferred Stock may be issued from time
to time by the Board of Directors as herein provided in one or more series.
The designations, relative rights, preferences and limitations of the
Series Preferred Stock, and particularly of the shares of each series
thereof, may be similar to or may differ from those of any other series.
The Board of Directors of the Corporation is hereby expressly granted
authority, subject to the provisions of this ARTICLE THIRD, to issue from
time to time Series Preferred Stock in one or more series and to fix from
time to time before issuance thereof, by filing a certificate pursuant to
the Business Corporation Law, the number of shares in each such series of
such class and all designations, relative rights (including the right to
convert into shares of any class or into shares of any series of any
class), preferences and limitations of the shares in each such series,
including but without limiting the generality of the foregoing, the
following:
(i) The number of shares to constitute such series (which
number may at any time, or from time to time, be increased or
decreased by the Board of Directors, notwithstanding that shares
of the series may be outstanding at the time of such increase or
decrease, unless the Board of Directors shall have otherwise
provided in creating such series) and the distinctive designation
thereof;
(ii) The dividend rate on the shares of such series, and the
date or dates, if any, from which dividends thereon shall be
cumulative;
(iii) Whether or not the shares of such series shall be
redeemable, and, if redeemable, the date or dates upon
or after which they shall be redeemable, the amount per share
(which shall be, in the case of each share, not less than its
preference upon involuntary liquidation, plus an amount equal to
all
-4-
<PAGE>
dividends thereon accrued and unpaid, whether or not earned or
declared) payable thereon in the case of the redemption thereof,
which amount may vary at different redemption dates;
(iv) The right, if any, of holders of shares of such series
to convert the same into, or exchange the same for
Common Stock, and the terms and conditions of such conversion or
exchange, as well as provisions for adjustment of the conversion
rate in such events as the Board of Directors shall determine;
(v) The amount per share payable on the shares of such
series upon the voluntary and involuntary liquidation,
dissolution or winding up of the Corporation;
(vi) Whether the holders of shares of such series shall have
voting power, full or limited, in addition to the voting powers
provided by law, and in case additional voting powers are
accorded to fix the extent thereof; and
(vii) Generally to fix the other rights and privileges and
any qualifications, limitations or restrictions of such rights
and privileges of such series, provided, however, that no such
rights, privileges, qualifications, limitations or restrictions
shall be in conflict with the Certificate of Incorporation of the
Corporation or with the resolution or resolutions adopted by the
Board of Directors, as hereinabove provided, providing for the
issue of any series for which there are shares then outstanding.
All shares of Series Preferred Stock of the same series shall be
identical in all respects, except that shares of any one series issued at
different times may differ as to dates, if any, from which dividends
thereon may accumulate or accrue. All shares of Series Preferred Stock of
all series shall be of equal rank and shall be identical in all respects
except that to the extent not otherwise limited in this ARTICLE THIRD any
series may differ from any other series with respect to any one or more of
the designations, relative rights, preferences and limitations described or
referred to in subparagraphs (i) to (vii) inclusive above.
2. DIVIDENDS: Dividends on the outstanding Series Preferred Stock of
each series shall be declared and paid or set apart for payment before any
dividends shall be declared and paid or set apart for payment on the Common
Stock with respect to the same quarterly dividend period. Dividends on any
shares of Series Preferred Stock shall be cumulative only if and to the
extent set forth in a certificate filed pursuant to law. After dividends on
all shares of Series Preferred Stock (including cumulative dividends if and
to the extent any such shares shall be entitled thereto) shall have been
declared and paid or set apart for payment with respect to any quarterly
dividend period, and subject to the provisions of the Preferred Stock with
respect to dividends as above provided, then and not otherwise so long as
any shares of the Preferred Stock or Series Preferred Stock shall remain
outstanding, dividends may be declared and paid or set apart for payment
with respect to the same quarterly dividend period on the Common Stock out
of the assets or funds of the Corporation legally available therefor.
All shares of Series Preferred Stock of all series shall be of equal
rank, preference and priority as to dividends irrespective of whether or
not the rates of dividends to which the same shall be entitled shall be the
same and when the stated dividends are not paid in full, the shares of all
series of the Series Preferred Stock shall share ratably in the payment
thereof in accordance with the sums which would be payable on such shares
if all dividends were paid in full, provided, however, that any two or more
series of the Series Preferred Stock may differ from each other as to the
existence and extent of the right to cumulative dividends, as aforesaid.
3. VOTING RIGHTS: Except as otherwise specifically provided herein or
in the certificate filed pursuant to law with respect to any series of the
Series Preferred Stock, or as otherwise provided by law, the Series
Preferred Stock shall not have any right to vote for the election of
directors or for any other purpose and the Preferred Stock and the Common
Stock shall have the exclusive right to vote for the election of directors
and for all other purposes; provided, however, that at any time when six
(6) quarterly dividends on any one or more series of Series Preferred Stock
entitled to receive cumulative dividends shall be in default, the holders
of all such cumulative series at the time or times outstanding as to which
such default shall exist shall be entitled, at the
-5-
<PAGE>
next annual meeting of stockholders for the election of directors, voting
as a class, whether or not the holders thereof shall be entitled otherwise
to vote by certificate filed pursuant to law, to the exclusion of the
holders of Common Stock, Preferred Stock and any series of noncumulative
Series Preferred Stock, to vote for and elect two (2) members of the Board
of Directors of the Corporation, and provided, further, that at any time
when six (6) quarterly dividends on any one or more series of noncumulative
Series Preferred Stock shall be in default, the holders of all such
noncumulative series at the time or times outstanding as to which such
default shall exist shall be entitled, at the next annual meeting of
stockholders for the election of directors, voting as a class, whether or
not the holders thereof shall be entitled otherwise to vote by certificate
filed pursuant to law, to the exclusion of the holders of Common Stock,
Preferred Stock and any series of cumulative Series Preferred Stock, to
vote for and elect two (2) members of the Board of Directors of the
Corporation. All rights of all series of Series Preferred Stock to
participate in the election of directors pursuant to this paragraph 3 shall
continue in effect, in the case of all series thereof entitled to receive
cumulative dividends, until cumulative dividends have been paid in full or
set apart for payment on each cumulative series which shall have been
entitled to vote at the previous annual meeting of stockholders, or in the
case of all series of noncumulative Series Preferred Stock, until
noncumulative dividends have been paid in full or set apart for payment for
four consecutive quarterly dividend periods on each noncumulative series
which shall have been entitled to vote at the previous annual meeting of
stockholders. Directors elected by any class of stock, voting separately as
a class, may be removed only by a majority vote of such class, voting
separately as a class, so long as the voting power of such class shall
continue. Subject to the voting rights of the Preferred Stock and the
voting rights, if any, specifically provided in a certificate filed
pursuant to law in respect of any series of Series Preferred Stock, the
holders of the Common Stock, voting as a class, to the exclusion of the
holders of such series so entitled to vote for and elect members of the
Board pursuant to this paragraph 3, shall be entitled to vote for and elect
the balance of the Board of Directors.
Each stockholder entitled to vote at any particular time in accordance
with the foregoing provisions shall not have more than one vote for each
share of stock held of record by him and at the time entitled to voting
rights.
4. LIQUIDATION: In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, each
series of Series Preferred Stock shall have preference and priority over
the Common Stock for payment of the amount to which each outstanding series
of Series Preferred Stock shall be entitled in accordance with the
provisions thereof and each holder of Series Preferred Stock shall be
entitled to be paid in full such amounts, or have a sum sufficient for the
payment in full set aside, before any payments shall be made to the holders
of Common Stock, provided, however, that each holder entitled to receive
any preferential amounts provided by certificate filed pursuant to law with
respect to any series of the Series Preferred Stock shall not be entitled
to receive for each share so held, if such liquidation, dissolution or
winding up be voluntary, more than $55.00 per share, or if such
liquidation, dissolution or winding up be involuntary, more than $50.00 per
share plus in either case an amount equal to all dividends thereon accrued
and unpaid. If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation or proceeds thereof,
distributable among the holders of the shares of all series of the Series
Preferred Stock, shall be insufficient to pay in full the preferential
amount aforesaid, then such assets, or the proceeds thereof, shall be
distributed among such holders ratably in accordance with the respective
amounts which would be payable if all amounts payable thereon were paid in
full. After the payment to the holders of Series Preferred Stock of all
such amounts to which they are entitled, as above provided, and subject to
rights with respect to the Preferred Stock upon any such liquidation,
dissolution or winding up as above provided, the remaining assets and funds
of the Corporation shall be divided and paid to the holders of the Common
Stock.
5. REDEMPTION: In the event that the Series Preferred Stock of any
series shall be made redeemable as provided in clause (iii) of paragraph 1
of section (b) of this ARTICLE THIRD, the Corporation, at the option of the
Board of Directors, may redeem at any time or times, and from time to time,
all or any part of any one or more series of Series Preferred Stock
outstanding upon notice duly given as hereinafter specified, by paying for
each share the then applicable redemption price fixed by the Board of
Directors (including an amount equal to accrued and unpaid dividends to the
date fixed for redemption); provided, however, that a notice specifying the
shares to be redeemed, and the time and place of redemption (and, if less
than the total outstanding shares are to be redeemed, specifying the
certificate numbers and number of shares to be redeemed) shall be published
-6-
<PAGE>
once in a daily newspaper printed in the English language and published and
of general circulation in the Borough of Manhattan, The City of New York,
and shall be mailed, addressed to the holders of record of the Series
Preferred Stock to be redeemed at their respective addresses as the same
shall appear upon the books of the Corporation, not less than thirty (30)
days previous to the date fixed for redemption. If less than the whole
amount of any outstanding series of Series Preferred Stock is to be
redeemed, the shares of such series to be redeemed shall be selected by lot
or pro rata in any manner determined by resolution of the Board of
Directors to be fair and proper. From and after the date fixed in any such
notice as the date of redemption (unless default shall be made by the
Corporation in providing moneys at the time and place of redemption for the
payment of the redemption price) all dividends upon the Series Preferred
Stock so called for redemption shall cease to accrue, and all rights of the
holders of said Series Preferred Stock as stockholders in the Corporation,
except the right to receive the redemption price upon surrender of the
certificate representing the Series Preferred Stock so called for
redemption, duly endorsed for transfer, if required, shall cease and
determine. With respect to any shares of Series Preferred Stock so called
for redemption, if, before the redemption date, the Corporation shall
deposit with a bank or trust company in the Borough of Manhattan, The City
of New York, having a capital and surplus of at least $5,000,000, funds
necessary for such redemption, in trust, to be applied to the redemption of
the shares of Series Preferred Stock so called for redemption, then from
and after the date of such deposit, all rights of the holders of such
shares of Series Preferred Stock so called for redemption shall cease and
determine, except the right to receive, on and after the redemption date,
the redemption price upon surrender of the certificates representing such
shares of Series Preferred Stock so called for redemption, duly endorsed
for transfer, if required. Any interest accrued on such funds shall be paid
to the Corporation from time to time. Any funds so deposited and unclaimed
at the end of six (6) years from such redemption date shall be released and
repaid to the Corporation, after which the holders of such shares of Series
Preferred Stock so called for redemption shall look only to the Corporation
for payment of the redemption price. Notwithstanding the foregoing, no
redemption of any shares of any series of Series Preferred Stock shall be
made by the Corporation (1) which as of the date of mailing of the notice
of such redemption would, if such date were the date fixed for redemption,
reduce the net assets of the Corporation remaining after such redemption
below the aggregate amount payable upon voluntary or involuntary
liquidation, dissolution or winding up to the holders of shares having
rights senior or equal to the Series Preferred Stock in the assets of the
Corporation upon liquidation, dissolution or winding up; or (2) unless all
cumulative dividends for the current and all prior dividend periods have
been declared and paid or declared and set apart for payment on all shares
of the Corporation having a right to cumulative dividends; or (3) at a
redemption price in excess of $55.00 per share plus all accrued and unpaid
dividends thereon to the date fixed for redemption. No sinking funds shall
be created for the redemption, purchase or reacquisition otherwise of any
shares of any series of Series Preferred Stock not called for redemption as
above provided.
(c) COMMON STOCK
1. DIVIDENDS: Subject to all of the rights of the Preferred Stock and
the Series Preferred Stock, dividends may be declared and paid or set apart
for payment upon the Common Stock out of any assets or funds of the
Corporation legally available for the payment of dividends.
2. VOTING RIGHTS: Except as otherwise expressly provided with respect
to the Preferred Stock and the Series Preferred Stock or with respect to
any series of the Series Preferred Stock, the Preferred Stock and the
Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes, each holder of the Preferred Stock
and the Common Stock being entitled to one vote for each share thereof
held.
3. LIQUIDATION: Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock and holders of the Series Preferred Stock of each series
shall have been paid in full the amounts to which they respectively shall
be entitled, or an amount sufficient to pay the aggregate amount to which
the holders of the Preferred Stock and the Series Preferred Stock of each
series shall be entitled shall have been deposited with a bank or trust
company having its principal office in the Borough of Manhattan, The City
of New York, and having a capital, surplus and undivided profits of at
least
-7-
<PAGE>
Twenty-Five Million Dollars ($25,000,000) as a trust fund for the benefit
of the holders of such Preferred Stock and Series Preferred Stock, the
remaining net assets of the Corporation shall be distributed pro rata to
the holders of the Common Stock in accordance with their respective rights
and interests, to the exclusion of the holders of such Preferred Stock, and
Series Preferred Stock.
(d) GENERAL PROVISIONS
Shares of Preferred Stock of the Corporation redeemed as
hereinabove provided shall be deemed retired and extinguished and may
not be reissued.
A consolidation or merger of the Corporation with or into another
corporation or corporations or a sale, whether for cash, shares of
stock, securities or properties, of all or substantially all of the
assets of the Corporation shall not be deemed or construed to be a
liquidation, dissolution or winding up of the Corporation within the
meaning of this Article.
No holder of Common Stock, Preferred Stock or Series Preferred Stock of the
Corporation shall be entitled, as such, as a matter of right, to subscribe for
or purchase any part of any new or additional issue of stock of any class or
series whatsoever or of securities convertible into stock of any class
whatsoever, whether now or hereafter authorized and whether issued for cash or
other consideration, or by way of dividend.
FOURTH: The office of the Corporation shall be located in the City, County
and State of New York. The address to which the Secretary of State shall mail a
copy of process in any action or proceeding against the Corporation which may be
served upon him is 7733 Forsyth Boulevard, St. Louis, Missouri 63105.
FIFTH: The duration of the Corporation shall be perpetual.
SIXTH: The Secretary of State of New York is designated as the agent of the
Corporation upon whom process in any action or proceeding against it may be
served. In addition, CT Corporation System, 1633 Broadway, New York, New York
10019, is designated as the registered agent of the Corporation upon whom
process in any action or proceeding against it may be served.
SEVENTH: The following provisions are inserted for the regulation and
conduct of the affairs of the Corporation, and it is expressly provided that
they are intended to be in furtherance and not in limitation or exclusion of the
powers conferred by statute.
(a) The Board of Directors may by resolution passed by two-thirds
of the whole Board designate three or more of its number to constitute
an Executive Committee, which shall have and exercise, subject to such
limitations, if any, as may be prescribed by the By-Laws or by
resolution of the Board of Directors, the powers of the Board of
Directors in the management of the business and affairs of the
Corporation, provided such Executive Committee shall act only at such
times as the Board of Directors is not in session and in no case to
the exclusion of the right of the Board of Directors at any time to
act as a Board upon any business of the Corporation.
(b) Subject to the provisions of the By-Laws, meetings of the
stockholders and directors of the Corporation for all purposes may be
held at any place within the State of New York and, unless otherwise
provided by law, at any place without such State.
(c) All corporate powers, including the sale, mortgage,
hypothecation and pledge of the whole or any part of the corporate
property, shall be exercised by the Board of Directors, except as
otherwise expressly provided by law.
(d) The Board of Directors is hereby expressly authorized to apply
in its discretion such portion of the net income of the Corporation as
it deems advisable to the redemption or purchase for retirement of the
Preferred
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Stock at an amount not exceeding the redemption price thereof, whether
or not there are dividends in arrears on the Preferred Stock and
whether or not any dividends have been paid on the Common Stock.
(e) The Corporation may have one or more offices within or without
the State of New York and may keep the books of the Corporation,
subject to the provisions of the laws of the State of New York, at
such place or places within or without the State of New York as the
Board of Directors shall from time to time determine.
(f) The Board of Directors shall from time to time decide whether
and to what extent and at what times and under what conditions and
requirements the accounts and books of the Corporation, or any of
them, except the stock book, shall be open to the inspection of the
stockholders, and no stockholder shall have any right to inspect any
books or documents of the Corporation except as conferred by the laws
of the State of New York or authorized by the Board of Directors.
(g) A director of the Corporation shall not, in the absence of
fraud, be disqualified by his office from dealing with or contracting
with the Corporation either as vendor, purchaser or otherwise, nor, in
the absence of fraud, shall any transaction or contract of the
Corporation be void or voidable or affected by reason of the fact that
any director or any firm, of which any director is a member, or any
corporation, of which the director is an officer, director or
stockholder, is in any way interested in such transaction or contract;
provided that at the meeting of the Board of Directors or of the
Committee thereof having authority in the premises to authorize or
confirm said contract or transaction, the interest of such director,
firm or corporation is disclosed or known, and there shall be present
a quorum of directors or of the directors constituting such Committee
not so interested or connected, and such contract or transaction shall
be approved by a majority of such quorum, which majority shall consist
of directors not so interested or connected. Nor shall any director or
directors so interested or connected be liable to the Corporation or
to any stockholders or creditor thereof or to any other person for any
loss incurred by it under or by reason of any such contract or
transaction. Nor shall any such director or directors be accountable
for any gains or profits realized thereon; always provided, however,
that such contract or transaction shall at the time it was entered
into have been a reasonable one to have been entered into and shall
have been upon terms that at the time were fair.
(h) Any contract, transaction or act of the Corporation or of the
Board of Directors or of the Executive Committee or of any other duly
constituted committee and of which disclosure shall be made in the
notice of the meeting and which shall be approved or ratified by a
majority in interest of a quorum of the stockholders of the
Corporation having voting power at any annual or any special meeting
called for such purpose shall, except as otherwise specifically
provided herein or provided by the laws of the State of New York, be
as valid and as binding as though approved or ratified by every
stockholder of the Corporation; provided, however, that any failure of
the Stockholders to approve or ratify such contract, transaction or
act, when and if submitted, shall not be deemed in any way to
invalidate the same or to deprive the Corporation, its directors or
officers of their right to proceed with such contract, transaction or
action. Any director of the Corporation may vote upon any contract or
other transaction between the Corporation and any subsidiary or
affiliated corporation without regard to the fact that he is also a
director of such subsidiary or affiliated corporation.
(i) The Board of Directors shall have power from time to time to
fix and to determine and vary the amount of the working capital of the
Corporation, and to direct and determine the use and disposition of
any surplus or net profits over and above the capital stock paid in;
and in its discretion the Board of Directors may use and apply any
such surplus or accumulated profits in purchasing or acquiring bonds
or other obligations of the Corporation, to such extent and in such
manner and upon such terms as the Board of Directors shall deem
expedient.
(j) Directors may be removed at any time by a majority vote of the
stockholders entitled to vote, except that directors elected by any
class of stock, voting separately as a class, may be removed only by a
majority vote of such class, voting separately as a class, so long as
the voting power of such class shall continue.
(k) A person who is or was a director of the Corporation shall not
be liable to the Corporation or its stockholders for damages for any
breach of duty in such capacity occurring after the adoption of this
paragraph
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(k), except that the foregoing provisions shall not eliminate or limit
liability where such liability is imposed, from time to time, by the law of
New York State, provided, however, that nothing in this paragraph shall
directly or indirectly increase the liability of any such person based upon
acts or omissions occurring before the adoption hereof.
EIGHTH: The Corporation hereby reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation as now stated and as hereafter amended, altered or changed in
the manner now or hereafter prescribed by the laws of the State of New
York, and all rights and powers conferred by this Certificate of
Incorporation on stockholders, directors, or officers of the Corporation
are hereby granted subject to this reservation; provided that the
provisions of this Certificate of Incorporation, as so amended, changed,
altered or repealed, shall contain such provisions as shall be lawful.
NINTH: The number of directors of the Corporation, exclusive of
directors, if any, to be elected by the holders of 4% Cumulative Preferred
Stock or the holders of one or more series of Series Preferred Stock
pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of
Section (b), respectively, of ARTICLE THIRD herein, shall be not less than
ten nor more than sixteen. Subject to such limitation, such number may be
fixed by the By-Laws, or by action of the stockholders or of the Board
under the specific provisions of a By-Law adopted by the stockholders. The
directors of the Corporation shall be divided into three classes as nearly
equal in number as possible. There shall be at least three directors in
each class. The term of office of the first class shall expire at the first
annual meeting of stockholders succeeding the initial classification of
directors, the term of the office of the second class shall expire at the
second annual meeting succeeding such classification and that of the third
class at the third annual meeting succeeding such classification. At each
annual meeting, directors to replace those whose terms expire at such
annual meeting shall be elected to hold office until the third succeeding
annual meeting. If the number of directors is changed, any newly created
directorships or decrease in directorships shall be so apportioned among
the classes as to make all classes as nearly equal in number as possible.
If the number of directors is increased by the Board of Directors and any
newly created directorships are filled by the Board, there shall be no
classification of the additional directors until the next annual meeting of
stockholders. Notwithstanding the foregoing, if the holders of 4%
Cumulative Preferred Stock or the holders of one or more series of Series
Preferred Stock shall become entitled to elect two members of the Board
pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of
Section (b), respectively, of ARTICLE THIRD herein, the terms of all
members of the Board of Directors previously elected shall expire at the
time of such election and the entire Board of Directors shall be elected in
the manner specified in said Paragraph 2 of Section (a) or said Paragraph 3
of Section (b) of ARTICLE THIRD, each director to serve until the next
meeting of stockholders at which directors are elected; and whenever
neither the holders of the 4% Cumulative Preferred Stock nor the holders of
any series of Series Preferred Stock is any longer entitled to vote for the
election of two directors as provided in said Paragraph 2 of Section (a) or
said Paragraph 3 of Section (b) of ARTICLE THIRD, the directors shall be
elected at the next annual meeting of stockholders held for such purpose in
the manner provided in the first eight sentences of this ARTICLE. Subject
to the foregoing, at each annual meeting of stockholders the successors to
the class of directors whose term shall then expire shall be elected to
hold office for a term of three years. No amendment to the Certificate of
Incorporation of the Corporation shall amend, alter, change or repeal any
of the provisions of this ARTICLE NINTH unless the amendment effecting such
amendment, alteration, change or repeal shall receive the affirmative vote
of the holders of two-thirds of the shares of all classes of stock of the
Corporation entitled to vote in elections of directors, considered for the
purposes of this ARTICLE NINTH as one class.
TENTH: (a) The affirmative vote of the holders of not less than a
majority of the Voting Stock (as hereinafter defined) of the Corporation
shall be required before the Corporation may purchase any outstanding
shares of Common Stock of the Corporation at a price known by the
Corporation to be above Market Price (as hereinafter defined) from a person
known by the Corporation to be a Selling Shareholder (as hereinafter
defined), unless the purchase is made by the Corporation on the same terms
and as a result of a duly authorized offer to purchase any and all of the
outstanding shares of Common Stock of the Corporation.
(b) For purposes of ARTICLE TENTH:
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(1) The term "Voting Stock" shall mean the outstanding shares of
stock of the Corporation entitled to vote in elections of directors of
the Corporation considered as one class.
(2) The majority vote required by Section (a), when applicable,
shall be in addition to any lesser vote or no vote required or
permitted by law or this Certificate of Incorporation exclusive of
this ARTICLE TENTH and the shares of the Selling Shareholder shall,
for this purpose, be counted as having abstained regardless of how
they have been voted.
(3) The term "Market Price" shall mean the highest closing sale
price, during the 30-day period immediately preceding the date in
question, of a share of the Common Stock of the Corporation on the
Composite Tape for New York Stock Exchange Issues, or, if such stock
is not quoted on the Composite Tape or is not listed on such Exchange,
on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing
bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system
then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock.
(4) The term "Selling Shareholder" shall mean and include any
person who or which is the beneficial owner of in the aggregate more
than three percent of the outstanding shares of Common Stock of the
Corporation and who or which has purchased or agreed to purchase any
of such shares within the most recent two-year period.
(5) A "person" shall mean any individual, firm, partnership,
corporation or other entity.
(6) A person shall be the "beneficial owner" of any shares of
Common Stock of the Corporation:
(i) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or
indirectly; or
(ii) which such person or any of its Affiliates or Associates
has (a) the right to acquire (whether such right is conditional
or exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing thereof.
(7) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on July 1, 1984.
(8) For the purposes of determining whether a person is a Selling
Shareholder, the number of shares of Common Stock deemed to be
outstanding and the number of shares beneficially owned by the person
shall include shares respectively deemed owned through application of
paragraph (6) of this Section (b) but shall not include any other
shares of Common Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise, or shares of the
Selling Shareholder whose acquisition of more than three percent of
the outstanding shares of Common Stock of the Corporation within the
most recent two-year period results from other than a purchase or
agreement to purchase or vote shares of the Corporation.
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(9) Nothing contained in this ARTICLE TENTH shall be construed to
relieve any Selling Shareholder from any fiduciary obligation imposed
by law.
(10) The Board of Directors of the Corporation shall have the
power to determine the application of or compliance with this ARTICLE
TENTH, including, without limitation, (1) whether a person is a
Selling Shareholder; (2) whether a person is an Affiliate or Associate
of another; (3) whether Section (a) is or has become applicable in
respect of a proposed transaction; (4) what is the Market Price and
whether a price is above Market Price; and (5) when or whether a
purchase or agreement to purchase any share or shares of Common Stock
of the Corporation has occurred and when or whether a person has
become a beneficial owner of any share or shares of Common Stock of
the Corporation. Any decision or action taken by the Board of
Directors arising out of or in connection with the construction,
interpretation and effect of this ARTICLE TENTH shall lie within their
absolute discretion and shall be conclusive and binding except in
circumstances involving bad faith.
ELEVENTH: SECTION 1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS.
A. HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition to any
affirmative vote required by law or this Certificate of Incorporation, and
except as otherwise expressly provided in Section 2 of this ARTICLE
ELEVENTH, any transaction or contract which involves or includes:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested
Shareholder (as hereinafter defined) or (b) any other corporation
(whether or not itself an Interested Shareholder) which is, or after
such merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Shareholder or any Affiliate of any Interested
Shareholder of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value of $50,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Shareholder or any Affiliate of any Interested Shareholder in exchange
for cash, securities (to the extent the acquisition thereof does not
come within the requirements of ARTICLE TENTH) or other property (or a
combination thereof) having an aggregate Fair Market Value of
$50,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Interested Shareholder or any Affiliate of any Interested Shareholder;
or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the
outstanding shares of any class of Equity Security (as hereinafter
defined) of the Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder:
shall require the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified by law or in any agreement with
any national securities exchange or this Certificate of Incorporation
exclusive of this ARTICLE ELEVENTH.
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B. DEFINITION OF "BUSINESS COMBINATION". The term "Business
Combination" used in this ARTICLE ELEVENTH shall mean any transaction or
contract which is referred to in any one or more of clauses (i) through (v)
of Paragraph A of this Section 1.
Section 2. WHEN HIGHER VOTE IS NOT REQUIRED
The provisions of Section 1 of this ARTICLE ELEVENTH shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other provision
of this Certificate of Incorporation, if all of the conditions specified in
either of the following Paragraphs A or B are met:
A. APPROVAL BY DIRECTORS. The Business Combination shall have been
approved by the Board of Directors in accordance with the requirements of
ARTICLE SEVENTH.
B. PRICE AND PROCEDURE REQUIREMENTS. All of the following conditions
shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the
Business Combination, of consideration other than cash to be received
per share by holders of Common Stock in such Business Combination
shall be at least equal to the higher of the following:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder for any shares of Common
Stock acquired by it (1) within the two-year period immediately
prior to the first public announcement of the terms of the
proposed Business Combination (the "Announcement Date") or (2) in
the transaction in which it became an Interested Shareholder,
whichever is higher; or
(b) The Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (such latter date is
referred to in this ARTICLE ELEVENTH as the "Determination
Date"), whichever is higher;
(ii) The aggregate amount of the cash and the Fair Market Value,
as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of
shares of any other class of outstanding Voting Stock shall be at
least equal to the higher of the following (it being intended that the
requirements of this paragraph B (ii) shall be required to be met with
respect to every class of outstanding Voting Stock, whether or not the
Interested Shareholder has previously acquired any shares of a
particular class of Voting Stock):
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder for any shares of such
class of Voting Stock acquired by it (1) within the two-year
period immediately prior to the Announcement Date or (2) in the
transaction in which it became an Interested Shareholder,
whichever is higher;
(b) (if applicable) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; and
(c) The Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
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(iii) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as the Interested Shareholder has previously
paid for shares of such class of Voting Stock. If the Interested
Shareholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock previously
acquired by it. The price determined in accordance with paragraph B
(i) and B (ii) of this Section 2 shall be subject to appropriate
adjustment in the event of any stock dividend, stock split,
combination of shares or similar event.
(iv) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business
Combination: (a) except as approved by the Board of Directors in
accordance with the requirements of ARTICLE SEVENTH, there shall have
been no failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on any
outstanding stock having preference over the Common Stock as to
dividends or upon liquidation; (b) there shall have been (1) no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock),
except as approved by the Board of Directors in accordance with the
requirements of ARTICLE SEVENTH, and (2) an increase in such annual
rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization
or any similar transaction which has the effect of reducing the number
of outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by the Board of Directors in
accordance with the requirements of ARTICLE SEVENTH; and (c) such
Interested Shareholder shall not have become the beneficial owner of
any additional shares of Voting Stock or securities convertible into
Voting Stock except as part of the transaction which results in such
Interested Shareholder becoming an Interested Shareholder.
(v) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public shareholders of the Corporation
at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions).
Section 3. CERTAIN DEFINITIONS. For the purpose of this ARTICLE ELEVENTH:
A. A "person" shall mean any individual, firm, corporation or other
entity.
B. "Interested Shareholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of 20% or
more of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 20% or more of the voting
power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
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Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
D. For the purpose of determining whether a person is an Interested
Shareholder pursuant to paragraph B of this Section 3, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph C of this Section 3 but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on July 1, 1984.
F. "Subsidiary" means any corporation of which a majority of any class
of Equity Security is owned, directly or indirectly, by the Corporation,
provided, however, that for the purposes of the definition of Interested
Shareholder set forth in paragraph B of this Section 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of Equity Security is owned, directly or indirectly, by the
Corporation.
G. "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New York
Stock Exchange issues, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in
use, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by the Board of
Directors in good faith; and (ii) in the case of property other than cash
or stock, the fair market value of such property on the date in question as
determined by the Board of Directors in good faith.
H. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in paragraphs B (i) and (ii) of Section 2 of this ARTICLE ELEVENTH shall
include the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
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I. "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
July 1, 1984.
Section 4. POWERS OF THE BOARD OF DIRECTORS. The Board of Directors, in
accordance with the requirements of ARTICLE SEVENTH, shall have the power to
interpret all of the terms and provisions of this ARTICLE ELEVENTH, including,
without limitation, and on the basis of information known to the Board after
reasonable inquiry (a) whether a person is an Interested Shareholder, (b) the
number of shares of Voting Stock beneficially owned by any person, (c) whether a
person is an Affiliate or Associate of another, (d) whether the assets which are
the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value of
$50,000,000 or more.
Section 5. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS.
Nothing contained in this ARTICLE ELEVENTH shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
Section 6. AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of
this Certificate of Incorporation or the By-Laws (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws or otherwise) the affirmative vote or consent of
the holders of 80% or more of the outstanding Voting Stock, voting together as a
single class, shall be required to amend or repeal, or adopt any provisions
inconsistent with, this ARTICLE ELEVENTH or any provision hereof.
VI: That the restatement of the Certificate of Incorporation and the
amendment to Article Fourth contained therein were authorized by a vote of the
majority of directors present at a meeting of the Board at which a quorum was
present.
IN WITNESS WHEREOF, we have made, subscribed and verified the Certificate this
22nd day of June, 1994.
Mallinckrodt Group Inc.
----------------------------------------------------
C. Ray Holman, PRESIDENT AND CHIEF EXECUTIVE OFFICER
----------------------------------------------------
Roger A. Keller, VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
(CORPORATE SEAL)
State of Missouri )
) ss.:
County of St. Louis )
C. Ray Holman, being duly sworn, deposes and says that: he is President and
Chief Executive Officer of Mallinckrodt Group Inc., the corporation named in and
described in the foregoing certificate; he has read the foregoing certificate
and knows the contents thereof; and the same is true of his own knowledge,
except as to the matters therein stated to be alleged upon information and
belief, and as to those matters he believes to be true.
-----------------------------------------------------
C. Ray Holman
Sworn to before me this _____ day of __________, 1994.
- ------------------------------------------------------
Notary Public
-16-
<PAGE>
My Commission Expires: _________________________.
-17-
<PAGE>
Exhibit 4.5
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
________________________
MALLINCKRODT GROUP INC.
(formerly known as IMCERA Group Inc.)
(Exact name of registrant as specified in its charter)
NEW YORK 36-1263901
(State of incorporation or organization) (IRS employer identification number)
7733 FORSYTH BOULEVARD, ST. LOUIS, MISSOURI 63105
(Address of principal executive offices) (Zip Code)
SECURITIES TO BE REGISTERED PURSUANT TO
SECTION 12(b) OF THE ACT
- -------------------------------------------------------------------------------
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6% Notes due October 15, 2003 New York Stock Exchange, Incorporated
- -------------------------------------------------------------------------------
7% Debentures due December 15, 2013 New York Stock Exchange, Incorporated
- -------------------------------------------------------------------------------
SECURITIES TO BE REGISTERED PURSUANT TO
SECTION 12(G) OF THE ACT
None
<PAGE>
Item 1. Description of Registrant's Securities to be Registered.
On April 27, 1992, Registration Statement No. 33-47081 on Form S-3 of
Mallinckrodt Group Inc., formerly known as IMCERA Group Inc. (the "Company"), a
New York corporation, relating to $250,000,000 of Debt Securities, was declared
effective.
(a) $100,000,000 AGGREGATE PRINCIPAL AMOUNT OF 6% NOTES DUE OCTOBER
15, 2003 (THE "NOTES") OF THE COMPANY.
The Company issued a Prospectus, dated October 12, 1993, as
supplemented by Prospectus Supplement dated October 19, 1993, pursuant to the
aforementioned Registration Statement, relating to the Notes. The information
set forth under the caption "Description of the Securities" in such Prospectus
and under the caption "Description of the Notes" in such Prospectus Supplement
is incorporated herein by reference.
(b) $100,000,000 AGGREGATE PRINCIPAL AMOUNT OF 7% DEBENTURES DUE
DECEMBER 15, 2013 (THE "DEBENTURES") OF THE COMPANY.
The Company issued a Prospectus, dated December 1, 1993, as
supplemented by Prospectus Supplement dated December 8, 1993, pursuant to the
aforementioned Registration Statement, relating to the Debentures. The
information set forth under the caption "Description of the Securities" in such
Prospectus and under the caption "Description of the Debentures" in such
Prospectus Supplement is incorporated herein by reference.
Item 2. Exhibits
Exhibit
Number
4.1 Form of Indenture dated as of March 15, 1985 between the Company
and Morgan Guaranty Trust Company of New York, as Trustee,
including Form of Securities (incorporated by reference to
Registration Statement No. 2-96566)
<PAGE>
4.2 Form of First Supplemental Indenture dated as of April 1, 1992,
to Indenture dated March 15, 1985 (incorporated by reference to
Registration Statement No. 33-47081)
4.3 Specimen 6% Note due October 15, 2003
4.4 Specimen 7% Debenture due December 15, 2013
-2-
<PAGE>
Signature
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
MALLINCKRODT GROUP INC.
By/s/ WILLIAM B. STONE
-------------------------------------
Name: William B. Stone
Title: Vice-President and Controller
Date: May 6, 1994
-3-
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
4.1 Form of Indenture dated as of March 15, 1985
between the Company and Morgan Guaranty Trust
Company of New York, as Trustee, including Form
of Securities (incorporated by reference to
Registration Statement No. 2-96566)
4.2 Form of First Supplemental Indenture dated as of
April 1, 1992, to Indenture dated March 15, 1985
(incorporated by reference to Registration
Statement No. 33-47081)
4.3 Specimen 6% Note due October 15, 2003
4.4 Specimen 7% Debenture due December 15, 2013
-4-
<PAGE>
Exhibit 10.1(e)
EMPLOYMENT AGREEMENT
THIS AGREEMENT between International Minerals & Chemical Corporation, a New
York corporation (the "Company"), and Beverley L. Hayes ("Executive"), is made
as of the 7TH day of MARCH, 1990, to become effective as provided below;
WITNESSETH THAT:
A. The Company wishes to attract and retain well-qualified executive and
key personnel and to assure itself of the continuity of its management.
B. Executive is an officer or other key executive of the Company with
significant management responsibilities in the conduct of its business.
C. The Company recognizes that Executive is a valuable resource of the
Company and the Company desires to be assured of the continued services of
Executive.
D. The Company is concerned that in the event of a possible or threatened
change in control of the Company, uncertainties necessarily arise and Executive
may have concerns about the continuation of her employment status and
responsibilities and may be approached by others offering competing employment
opportunities, and the Company therefore desires to provide Executive assurance
as to the continuation of her employment status and responsibilities in such
event.
E. The Company further desires to assure that, if a possible
<PAGE>
or threatened change in control should arise and Executive should be involved in
deliberations or negotiations in connection therewith, Executive would be in a
secure position to consider and participate in such transaction as objectively
as possible in the best interests of the Company and to this end desires to
protect Executive from any direct or implied threat to her financial wellbeing.
F. Executive is willing to continue to serve as such but desires
assurance that in the event of such a change in control she will continue to
have the employment status and responsibilities she could reasonably expect
absent such event and that in the event this turns out not to be the case she
will have fair and reasonable severance protection on the basis of her service
to the Company to that time.
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. OPERATION OF AGREEMENT. The "effective date of this Agreement" shall
be the date on which a change in control of the Company (as described in Section
2) occurs. This Agreement shall not become effective, and the Company shall
have no obligation hereunder, if the employment of Executive with the Company
shall terminate for any reason prior to a change in control of the Company.
Executive shall have no right on account of this Agreement to be retained in the
employ of the Company or to be retained in any particular position in the
Company, unless and until a change in control has occurred.
2. CHANGE IN CONTROL. The term "change in control of the Company" shall
mean, and be deemed to have occurred, on the date of the
-2-
<PAGE>
first to occur of any of the following:
(a) there occurs a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A or Item 1 of Form 8-K, promulgated
under the Securities Exchange Act of 1934 as in effect on the
date of this Agreement or, if neither item remains in effect, any
regulations issued under the Securities Exchange Act of 1934
which serve similar purposes;
(b) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) is or becomes a
beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities except the event
described in this paragraph shall not be deemed to have occurred
by virtue of ownership of any securities of the Company by the
Company or by any employee benefit plan sponsored by the Company;
(c) individuals who, on February 21, 1990, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided that
(i) any person becoming a director subsequent to February 21,
1990, whose election, or nomination for election, by the
Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for
purposes of this paragraph (c), considered as though such person
were a member of the Incumbent Board, and (ii) in the event that
after February 21, 1990, the Board of Directors by a vote of at
least three-quarters of the directors comprising the Incumbent
Board shall have reduced or enlarged the size of the Board of
Directors or recommended to shareholders such a reduction or
enlargement, upon such reduction or enlargement having occurred,
the Board of Directors as so reduced or enlarged shall thereupon
constitute the Incumbent Board for all purposes including,
without limitation, for the purpose of determining what
thereafter constitutes the
-3-
<PAGE>
majority or three-quarters specified above;
(d) the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a
basis whereby less than 50% of the total voting power of the
surviving corporation is represented by shares held by
shareholders of the Company prior to such merger or
consolidation; or
(e) the Company shall have sold all or, as determined by the Board of
Directors, substantially all of its assets to another corporation
or other entity or person.
3. EMPLOYMENT. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the effective date of this Agreement and
ending on the last day of the month in which occurs the third anniversary of the
effective date of this Agreement (the "Employment Period"). During the
Employment Period, Executive shall exercise such position and authority and
perform such responsibilities as are commensurate with the position and
authority being exercised and duties being performed by the Executive
immediately prior to the effective date of this Agreement, which services shall
be performed at the location where the Executive was employed immediately prior
to the effective date of this Agreement or at such other location as the Company
may reasonably require; provided that the Executive shall not be required to
accept any such other location that she deems unreasonable in the light of her
personal circumstances. The Executive agrees that during the Employment Period
she shall devote her full business time exclusively to her responsibilities as
described herein and shall perform
-4-
<PAGE>
faithfully and efficiently such responsibilities and the responsibilities set
forth in the Employee Invention and Secrecy Agreement that is attached to and
made a part hereof as Exhibit A.
4. COMPENSATION AND BENEFITS. During the Employment Period, the
Executive shall receive the following compensation and benefits:
(a) She shall receive an annual base salary which is not less than
her annual base salary immediately prior to the effective date of
this Agreement, with the opportunity for increases, from time to
time thereafter which are in accordance with the Company's
regular executive compensation practices.
(b) She shall be eligible to participate on a reasonable basis, and
to continue her existing participation, in annual incentive,
stock option, restricted stock, long-term incentive performance,
and any other incentive compensation plan which provides
opportunities to receive compensation in addition to her annual
base salary which are the greater of (i) the opportunities
provided by the Company for executives with comparable duties or
(ii) the opportunities under any such plans in which she was
participating immediately prior to the effective date of this
Agreement.
(c) She shall be entitled to receive and participate in salaried
employee benefits (including, but not limited to, medical, life
and accident insurance, investment, stock ownership, and
disability benefits) and perquisites which are the greater of (i)
the employee benefits and perquisites provided by the Company to
executives with comparable duties or (ii) the employee benefits
and perquisites to which she was entitled or in which she
participated immediately prior to the effective date of this
Agreement.
(d) She shall be entitled to continue to accrue credited service for
retirement benefits and to be entitled to receive retirement
benefits under and pursuant to the terms of the Company's
qualified retirement plan for salaried employees; the Company's
supplemental executive retirement plan if, on the effective date,
she is a participant in such plan; and, any
-5-
<PAGE>
successor or other retirement plan or agreement in effect on the
effective date of this Agreement in respect of her retirement,
whether or not a qualified plan or agreement, so that her
aggregate monthly retirement benefit from all such plans and
agreements (regardless when she begins to receive such benefit)
will be not less than it would be had all such plans and
agreements in effect immediately prior to the effective date of
this Agreement continued to be in effect without change until and
after she begins to receive such benefit.
5. TERMINATION. The term "Termination" shall mean termination, prior to
the expiration of the Employment Period, of the employment of the Executive with
the Company for any reason other than death, disability (as described below),
cause (as described below), or voluntary resignation (as described below).
(a) The term "disability" means physical or mental incapacity
qualifying the Executive for long term disability under the
Company's long term disability plan.
(b) The term "cause" means (i) the willful and continued failure of
the Executive to perform substantially her duties with the
Company (other than any failure due to physical or mental
incapacity) after a demand for substantial performance is
delivered to her by the Board of Directors which specifically
identifies the manner in which the Board believes she has not
substantially performed her duties or (ii) willful misconduct
materially and demonstrably injurious to the Company. No act or
failure to act by the Executive shall be considered "willful"
unless done or omitted to be done by her not in good faith and
without reasonable belief that her action or omission was in the
best interest of the Company. The unwillingness of the Executive
to accept any or all of a change in the nature or scope of her
position, authorities or duties, a reduction in her total
compensation or benefits, a relocation that she deems
unreasonable in light of her personal circumstances, or other
action by or request of the Company in respect of her position,
authority, or responsibility that she reasonably
-6-
<PAGE>
deems to be contrary to this Agreement, may not be considered by
the Board of Directors to be a failure to perform or misconduct
by the Executive. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for cause for
purposes of this Agreement unless and until there shall have been
delivered to her a copy of a resolution, duly adopted by a vote
of three-quarters of the entire Board of Directors of the Company
at a meeting of the Board called and held (after reasonable
notice to the Executive and an opportunity for the Executive and
her counsel to be heard before the Board) for the purpose of
considering whether the Executive has been guilty of such a
willful failure to perform or such willful misconduct as
justifies termination for cause hereunder, finding that in the
good faith opinion of the Board the Executive has been guilty
thereof and specifying the particulars thereof.
(c) The resignation of the Executive shall be deemed "voluntary" if
it is for any reason other than one or more of the following:
(i) The Executive's resignation or retirement is requested
by the Company other than for cause;
(ii) Any other significant change in the nature or scope of
the Executive's position, authorities or duties from
those described in Section 3;
(iii) Any other reduction in her total compensation or
benefits from that provided in Section 4;
(iv) The breach by the Company of any other provision of
this Agreement; or
(v) The reasonable determination by the Executive that, as
a result of a change in control of the Company and a
change in circumstances thereafter significantly
affecting her position, she is unable to exercise the
authorities and responsibilities attached to her
position and contemplated by Section 3.
(d) Termination that entitles the Executive to the
-7-
<PAGE>
payments and benefits provided in Section 6 shall not be deemed or treated by
the Company as the termination of the Executive's employment or the forfeiture
of her participation, award, or eligibility for the purpose of any plan,
practice or agreement of the Company referred to in Section 4.
6. TERMINATION PAYMENTS AND BENEFITS. In the event of and within 30 days
following Termination, the Company shall pay to the Executive:
(a) Her base salary and all other benefits due her as if she had
remained an employee pursuant to this Agreement through the
remainder of the month in which Termination occurs less
applicable withholding taxes and other authorized payroll
deductions;
(b) The amount equal to the target award for the Executive under the
Company's annual incentive compensation plan for the fiscal year
in which Termination occurs, reduced pro rata for that portion of
the fiscal year not completed as of the end of the month in which
Termination occurs, provided that if the Executive has deferred
her award for such year under the plan, the payment due the
Executive under this Paragraph (b) shall be paid in accordance
with the terms of the deferral; and
(c) A lump sum severance allowance in an amount which is equal to the
sum of the amounts determined in accordance with the following
subparagraphs (i) and (ii):
(i) an amount equivalent to twice her annual base salary at the
rate in effect immediately prior to Termination; and
(ii) an amount equivalent to twice the average of the annual
incentive compensation received or deferred by the Executive
for the two fiscal years immediately prior to the fiscal
year in which Termination occurs.
If the Executive's Termination occurs within her first year of
employment with the Company and before she has received or deferred
annual incentive
-8-
<PAGE>
compensation, her severance allowance under subparagraph (ii) will be
$300,000. If her Termination occurs during her second year of
employment with the Company and after she has received or deferred
annual incentive compensation (if any) for the first fiscal year of
her employment, but she has not yet received or deferred her annual
incentive compensation for the second fiscal year, her severance
allowance under subparagraph (ii) will be an amount equivalent to
twice the average of: (i) the amount (if any) of annual incentive
compensation which she received or deferred during the first fiscal
year prior to Termination and (ii) $150,000.
7. NON-COMPETITION AND CONFIDENTIALITY. The Executive agrees that:
(a) there shall be no obligation on the part of the Company to
provide any further payments or benefits (other than payments or
benefits already earned or accrued) described in Section 6 if,
when, and so long as the Executive shall be employed by or
otherwise engage in any business which is competitive with any
business of the Company or of any of its subsidiaries, as such
business existed as of the effective date of this Agreement, in
which the Executive was engaged during her employment, and if
such employment or activity is likely to cause or causes serious
damage to the Company or any of its subsidiaries; and
(b) during and after the Employment Period, she will not divulge or
appropriate to her own use or the use of others any secret or
confidential information pertaining to the business of the
Company or any of its subsidiaries obtained during her employment
by the Company, it being understood that this obligation shall
not apply when and to the extent any of such information becomes
publicly known or available other than because of her act or
omission.
8. ARRANGEMENTS NOT EXCLUSIVE OR LIMITING. The specific arrangements
referred to herein are not intended to exclude or limit Executive's
participation in other benefits available to executive
-9-
<PAGE>
personnel generally, or to preclude or limit other compensation or benefits as
may be authorized by the Board of Directors of the Company at any time, or to
limit or reduce any compensation or benefit to which Executive would be entitled
but for this Agreement.
9. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a
change in control, the Board of Directors or a stockholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute, litigation seeking to have this Agreement
declared unenforceable, or may take, or attempt to take, other action to deny
Executive the benefits intended under this Agreement. In these circumstances,
the purpose of this Agreement could be frustrated. It is the intent of the
parties that Executive not be required to incur the legal fees and expenses
associated with the protection or enforcement of her rights under this Agreement
by litigation or other legal action because such costs would substantially
detract from the benefits intended to be extended to Executive hereunder, nor be
bound to negotiate any settlement of her rights hereunder under threat of
incurring such costs. Accordingly, if at any time after the effective date of
this Agreement, it should appear to Executive that the Company is or has acted
contrary to or is failing or has failed to comply with any of its obligations
under this Agreement for the reason that it regards this Agreement to be void or
unenforceable or for any other reason, or that the Company has purported to
terminate her employment for cause or is in the course of doing so in either
case contrary to this Agreement, or in the event that the Company or
-10-
<PAGE>
any other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation or other legal action designed to
deny, diminish or to recover from Executive the benefits provided or intended to
be provided to her hereunder, and the Executive has acted in good faith to
perform her obligations under this Agreement, the Company irrevocably authorizes
Executive from time to time to retain counsel of her choice at the expense of
the Company to represent her in connection with the protection and enforcement
of her rights hereunder, including without limitation representation in
connection with termination of her employment contrary to this Agreement or with
the initiation or defense of any litigation or other legal action, whether by or
against the Executive or the Company or any director, officer, stockholder or
other person affiliated with the Company, in any jurisdiction. The reasonable
fees and expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by the Company on
a regular, periodic basis upon presentation by Executive of a statement or
statements prepared by such counsel in accordance with its customary practices,
up to a maximum aggregate amount of $200,000. Counsel so retained by Executive
may be counsel representing other officers or key executives of the Company in
connection with the protection and enforcement of their rights under similar
agreements between them and the Company and unless, in her sole judgment, use of
common counsel could be prejudicial to her or would not be likely to reduce the
fees and expenses chargeable hereunder to the Company, the Executive agrees to
use her best efforts to agree with such other officers or executives to retain
-11-
<PAGE>
common counsel.
10. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and personally delivered by
hand or sent by registered or certified mail, if to the Executive, to her at the
last address she has filed in writing with the Company or, if to the Company, to
its corporate secretary at its principal executive office.
11. NON-ALIENATION. The Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts provided
under this Agreement, and no payments or benefits due hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts
or by operation of law. So long as the Executive lives, no person, other than
the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
agreement of the parties in respect of the subject matter hereof. No provision
of this Agreement may be amended, waived, or discharged except by the mutual
written agreement of the parties. The consent of any other person to any such
amendment, waiver or discharge shall not be required.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by operation of
law or otherwise, including without limitation any corporation or other entity
or person which shall succeed (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the
-12-
<PAGE>
business and/or assets of the Company, and the Company will require any
successor, by agreement in form and substance satisfactory to Executive,
expressly to assume and agree to perform this Agreement. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of Executive and her legal representatives, heirs, and assigns, provided,
however, that in the event of Executive's death prior to payment or distribution
of all amounts, distributions, and benefits due her hereunder, each such unpaid
amount and distribution shall be paid in accordance with this Agreement to the
person or persons designated by Executive to the Company to receive such payment
or distribution and, in the event Executive has made no applicable designation,
to the person or persons designated by Executive as the beneficiary or
beneficiaries of proceeds of life insurance payable in the event of Executive's
death under the Company's group life insurance plan.
14. GOVERNING LAW. Except to the extent required to be governed by the
law of the State of New York because the Company is incorporated under the laws
of that state, the validity, interpretation, and enforcement of this Agreement
shall be governed by the law of whichever of the State of Illinois or the State
of New York that to the greater extent permits or does not prevent the
enforcement of this Agreement in accordance with its terms.
15. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or
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<PAGE>
more counterparts, each of which shall be deemed to be an original but all of
which together constitute one and the same instrument.
-----------------------------------------
IN WITNESS WHEREOF, the Executive has hereunto set her hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, and its corporate seal to be
hereunto affixed and attested by its Secretary or Assistant Secretary, all as of
the day and year first shown above written.
/S/ BEVERLEY L. HAYES
-----------------------------------
Executive
INTERNATIONAL MINERALS
& CHEMICAL CORPORATION
By /S/ GEORGE D. KENNEDY
-----------------------------------
ITS PRESIDENT AND CHIEF EXECUTIVE
OFFICER
(SEAL)
ATTEST
/S/ K.J. BURNS, JR.
- --------------------
Secretary
-14-
<PAGE>
Exhibit 10.7 (a)(ii)
September 1, 1993
C.R. HOLMAN
Dear Ray:
This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated
July 1, 1992, and as subsequently amended by letter dated April 30, 1993. The
amendment is necessary due to the recent increase in your compensation and
executive benefits.
Effective upon your acceptance of this amendment, the last sentence of the
opening paragraph of your Gross-Up Agreement is amended as follows:
"Notwithstanding the foregoing, your Gross-Up Payment, if any, may not
exceed $3,408,779."
Except as modified hereby all other terms and provisions of your Gross-Up
Agreement with the Company will remain in full force and effect.
Please indicate your acceptance of the amendment to your Gross-Up Agreement
dated July 1, 1992, and as subsequently amended by letter dated April 30, 1993
by signing the attached copy of this letter and returning it to my attention.
Very truly yours,
/s/ Beverley L. Hayes
I have read this letter and
understand and accept its terms.
/s/ C.R. Holman
- ----------------
C.R. Holman
Dated this 10 day of September, 1993
September 1, 1993
<PAGE>
Exhibit 10.7 (b)(ii)
WILLIAM J. MERCER
Dear Bill:
This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated
July 1, 1992, and as subsequently amended by letter dated April 30, 1993. The
amendment is necessary due to the recent increase in your compensation and
executive benefits.
Effective upon your acceptance of this amendment, the last sentence of the
opening paragraph of your Gross-Up Agreement is amended as follows:
"Notwithstanding the foregoing, your Gross-Up Payment, if any, may not
exceed $1,041,213."
Except as modified hereby all other terms and provisions of your Gross-Up
Agreement with the Company will remain in full force and effect.
Please indicate your acceptance of the amendment to your Gross-Up Agreement
dated July 1, 1992, and as subsequently amended by letter dated April 30, 1993
by signing the attached copy of this letter and returning it to my attention.
Very truly yours,
/s/ Beverley L. Hayes
I have read this letter and
understand and accept its terms.
/s/ William J. Mercer
- ----------------------
William J. Mercer
Dated this day of September, 1993
-----
<PAGE>
Exhibit 10.7 (c)(ii)
September 1, 1993
ROBERT G. MOUSSA
Dear Bob:
This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated
April 22, 1993. The amendment is necessary due to the recent increase in your
compensation and executive benefits.
Effective upon your acceptance of this amendment, the last sentence of the
opening paragraph of your Gross-Up Agreement is amended as follows:
"Notwithstanding the foregoing, your Gross-Up Payment, if any, may not
exceed $1,187,749."
Except as modified hereby all other terms and provisions of your Gross-Up
Agreement with the Company will remain in full force and effect.
Please indicate your acceptance of the amendment to your Gross-Up Agreement
dated April 22, 1993, by signing the attached copy of this letter and returning
it to my attention.
Very truly yours,
/s/ Beverley L. Hayes
I have read this letter and
understand and accept its terms.
/s/ Robert G. Moussa
- ---------------------
Robert G. Moussa
Dated this day of September, 1993
-----
<PAGE>
Exhibit 10.7 (d)(ii)
September 1, 1993
MACK G. NICHOLS
Dear Mack:
This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated
July 1, 1992. The amendment is necessary due to the recent increase in your
compensation and executive benefits.
Effective upon your acceptance of this amendment, the last sentence of the
opening paragraph of your Gross-Up Agreement is amended as follows:
"Notwithstanding the foregoing, your Gross-Up Payment, if any, may not
exceed $949,971."
Except as modified hereby all other terms and provisions of your Gross-Up
Agreement with the Company will remain in full force and effect.
Please indicate your acceptance of the amendment to your Gross-Up Agreement
dated July 1, 1992, by signing the attached copy of this letter and returning it
to my attention.
Very truly yours,
/s/ Beverley L. Hayes
I have read this letter and
understand and accept its terms.
/s/ Mack G. Nichols
- --------------------
Mack G. Nichols
Dated this 17 day of September, 1993
<PAGE>
Exhibit 10.7 (e)(ii)
September 1, 1993
BEVERLEY L. HAYES
Dear Bev:
This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated
July 1, 1992. The amendment is necessary due to the recent increase in your
compensation and executive benefits.
Effective upon your acceptance of this amendment, the last sentence of the
opening paragraph of your Gross-Up Agreement is amended as follows:
"Notwithstanding the foregoing, your Gross-Up Payment, if any, may not
exceed $834,461."
Except as modified hereby all other terms and provisions of your Gross-Up
Agreement with the Company will remain in full force and effect.
Please indicate your acceptance of the amendment to your Gross-Up Agreement
dated July 1, 1992, by signing the attached copy of this letter and returning it
to my attention.
Very truly yours,
/s/ Ray Holman
I have read this letter and
understand and accept its terms.
/s/ B.L. Hayes
- ---------------
Beverley L. Hayes
Dated this 1st day of September, 1993
<PAGE>
July 1, 1992
BEVERLEY L. HAYES
Dear Bev,
This letter is to assure you that in the event you become entitled to payments
by operation of the Employment Agreement dated March 7, 1990 ("Agreement")
between you and IMCERA Group Inc., formerly known as International Minerals &
Chemical Corporation ("IMCERA"), and if any of the payments to be made under the
Agreement ("Agreement Payments") will be subject to the tax ("Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
("Code") (or any similar tax that may hereafter be imposed), IMCERA shall pay to
you at the time specified in paragraph (c) below an additional amount ("Gross-up
Payment") such that the net amount retained by you, after deduction of any
Excise Tax on the Total Payments (as hereinafter defined) and any federal, state
and local income tax and Excise Tax upon the Gross-up Payment provided for by
this paragraph, but before deduction for any federal, state or local income tax
on the Agreement Payments, shall be equal to the sum of (a) the Total Payments,
and (b) an amount equal to the product of any deductions disallowed because of
the inclusion of the Gross-up Payment in your adjusted gross income and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-up Payment is to be made. Notwithstanding the
foregoing, your Gross-up Payment, if any, may not exceed $576,199.
(1) For purposes of determining whether any of the Agreement Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by you
in connection with a change in control (as the term is defined in the
IMCERA Group Inc. Management Compensation and Benefit Assurance Program) of
IMCERA or your termination of employment whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with IMCERA, any
person whose actions result in a change of control of IMCERA or any person
affiliated with IMCERA or such person) (which, together with the Agreement
Payments, shall constitute the "Total Payments") shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" within the meaning of Section 280G(b)
(1) of the Code shall be treated as subject to the Excise Tax, unless in
<PAGE>
the opinion of tax counsel selected by IMCERA's independent auditors, such
other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code or are otherwise not
subject to the Excise Tax,
(b) the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (i) the total
amount of the Total Payments or (ii) the amount of excess parachute
payments within the meaning of, Section 280G(b)(1) of the Code (after
applying clause (a), above), and
(c) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by IMCERA's independent auditors in accordance
with the principles of Sections 280(G)(d)(3) and (4) of the Code.
(2) For purposes of determining the amount of the Gross-up Payment, you
shall be deemed to (x) pay federal income taxes at the highest marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made and, (y) pay the applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which the Gross-up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes (determined
without regard to limitations on deductions based upon the amount of your
adjusted gross income), and (z) have otherwise allowable deductions for federal
income tax purposes at least equal to those disallowed because of the inclusion
of the Gross-up Payment in your adjusted gross income. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, you shall repay to
IMCERA at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction in Excise
Tax and/or a federal and state and local income tax deduction), plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-up Payment), IMCERA shall make an additional gross-up
payment in respect of sch excess (plus any interest payable with respect of such
excess) at the time that the amount of such excess is finally determined.
(3) The Gross-up Payment or portion thereof provided for in Paragraphs (1)
and (2)
<PAGE>
above shall be paid not later than the thirtieth day following payment of any
amounts under the Agreement; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, IMCERA shall pay to you on such day an estimate, as determined in good
faith by IMCERA, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274 (b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than the forty-fifth day after payment of any
amounts under the Agreement. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by IMCERA to you, payable on the fifth day after
demand by IMCERA (together with interest at the rate provided in Section 1274
(b)(2)(B) of the Code).
Should a change in control occur (as defined in the Management Compensation and
Benefit Assurance Program) and should Gross-up Payments become due you as a
result of the operation of your Agreement, then such Gross-up Payments will be
paid to you from the Trust Agreement between IMCERA Group Inc. and Wachovia Bank
of North Carolina, N.A., which has been established to protect payment
obligations of IMCERA under this letter agreement.
IMCERA is pleased to be able to provide you with this additional assurance of
economic protection in the event of a change in control.
Please sign, date and return the original of this letter in the envelope
provided and retain the enclosed copy for your records.
Very truly yours,
/s/ M.B. Ingle
M.B. Ingle
I have read this letter and
understand and accept its terms.
/s/ B.L. Hayes
---------------
(Signed)
7-1-92
------
(Dated)
<PAGE>
Exhibit 10.24
CONSULTANCY AGREEMENT
THIS AGREEMENT is entered into as of December 1, 1993, by and between
Mallinckrodt Group Inc., a New York corporation (the "Company") and HERVE M.
PINET ("Pinet").
WITNESSETH:
WHEREAS, Pinet has special knowledge and ability with respect to
international markets and financial transactions; and
WHEREAS, the Company has determined that it would be beneficial to use the
consulting services of Pinet to develop international business relationships and
provide expertise in other international business matters; and
WHEREAS, the Company wishes to clarity the capacity in which Pinet will
provide such services to the Company;
NOW, THEREFORE, it is mutually agreed as follows:
1. CONSULTANCY. Pinet will be retained as a consultant of the Company for
the period December 1, 1993 through November 30, 1994.
2. CONSULTING SERVICES. As a consultant, Pinet will (i) assist the
Company in forming strategic business relationships in Japan, China and Europe,
(ii) advise the Company with respect to economic trends in Eastern and Western
Europe with a particular focus on international banking transactions and, (iii)
provide such other assistance with international matters as may be directed from
time to time by the chief Executive Officer & President of the Company, C. Ray
Holman.
3. CONSULTING FEE. The Company will pay Pinet for his consulting services
and covenant not to compete, a monthly fee of Ten Thousand Dollars ($10,000.00)
payable on the last day of each month. No other fees or commissions will be
paid to Pinet arising out of his consulting services under this Agreement. This
Agreement, however, will not preclude the payment of fees for services rendered
by Pinet as a member of the Company's Board of Directors.
4. CONFIDENTIALITY OF COMPANY INFORMATION. Pinet agrees to maintain in
strict confidence any nonpublic information concerning the Company and its
subsidiaries that he knows or acquires in the course of rendering consulting
services under this Agreement.
<PAGE>
5. NON-COMPETE. In consideration of the fee provided in paragraph 3
above, Pinet agrees that he will not, during the term of this Agreement and for
a period of one year thereafter, be employed by or otherwise render any services
for any person or concern which is which he knows has the intention of becoming
a direct competitor of any primary or developing product lines with the primary
or developing market areas of any business of the Company or any wholly-owned
subsidiary as it now exists or may exist at the expiration of this Agreement
(and any extensions thereof) without the prior written consent of the Company,
which consent will not be unreasonably withheld.
6. EXPENSES. The Company will pay or reimburse Pinet, as the case may be,
for all expenses reasonably incurred by Pinet in rendering consulting services
which have been approved by C. Ray Holman, the President and Chief Executive
Officer of the Company, and for which a statement of itemized expenses with
substantiating documentation has been provided.
7. TERMINATION. The Company's obligations to Pinet and Pinet's
obligations to the Company as a consultant hereunder will terminate prior to
November 30, 1994, only in the event of Pinet's death or disability, or if the
Company determines that Pinet is in material default of his obligations under
this Agreement, or is guilty of wilful misconduct or gross negligence in the
performance thereof. For purposes of this paragraph, disability means a
physical or mental disability which the Company's Chief Executive Officer has
determined, acting with the advice of a competent medical doctor, renders or has
rendered Pinet unable to perform consulting services hereunder for a consecutive
period of one (1) month or more. No such determination will be made without at
least ten (10) day's prior written notice to Pinet, or his spouse, or his
personal representative, and such determination will not become effective to
terminate the Company's obligations to Pinet as consultant hereunder until the
last day of the month in which such notice is given.
8. INDEPENDENT CONTRACTOR STATUS. Pinet will be regarded as an
independent contractor in all matters pertaining to services performed
hereunder, and Pinet will not have the authority to assume, create, or incur any
liability or any obligation of any kind, either express or implied, against or
on behalf of the Company.
9. SEVERABILITY. This Agreement is divisible and separable so that if any
provisions are held to be invalid, such holding will not impair the remaining
provisions hereof. If any provision is held to be too broad to be enforced,
such provision will be construed to create only an obligation to the full extent
allowable by law.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which need not contain the signatures of more than one
party, but such counterparts taken together will constitute one and the same
Agreement.
<PAGE>
11. MISCELLANEOUS. The foregoing constitutes the entire Agreement between
the parties and can be amended only by written agreement signed by both parties.
Further, the Agreement will not be assignable or transferable, in whole or in
part. Any payment required to be made by the Company pursuant to the Agreement
to a person who is under a legal disability may be made by the Company to or for
the benefit of such person in such of the following ways as the Company may
determine: (a) directly to such person, (b) to the legal representative of such
person, (c) to some near relative of such person, to be used for the latter's
benefit, or (d) directly in payment of expenses in support, maintenance or
education of such person. The Company will not be required to see to the
application by any third party of any payments made pursuant hereto. All
questions in respect of this Agreement, including those pertaining to its
validity, interpretation and performance, shall be determined by the laws of the
State of Illinois.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by a duly authorized officer and Pinet has set his hand and seal as
of the date first above-written.
Mallinckrodt Group Inc.
By /s/ C.R. Holman
----------------
Its President and Chief Executive Officer
ACCEPTED:
By /s/ H. Pinet
------------
Date 12/1/93
-------
<PAGE>
Exhibit 10.29
MALLINCKRODT GROUP INC.
DEFERRAL ELECTION PLAN FOR NON-EMPLOYEE DIRECTORS
SECTION 1. INTRODUCTION
1.1 PURPOSE. The Mallinckrodt Group Inc. Deferral Election Plan for
Non-Employee Directors (the "Plan") has been established by Mallinckrodt Group
Inc. (the "Company") to encourage and enable non-employee members of the Board
of Directors of the Company who have heretofore elected or hereafter elect to
defer receipt of some or all of their Retainer and/or Attendance Fees to provide
a degree of financial flexibility with respect to the receipt of income and,
should they elect a deferral in the form of shares of common stock of the
Company, to increase their holdings of such stock.
1.2 EFFECTIVE DATE. Subject to approval of the Plan by the shareholders
of the Company at the Annual Meeting of Shareholders in calendar year 1994, as
the same may be adjourned, the Plan shall be effective on June 30, 1994. The
Plan shall be unlimited in duration.
1.3 SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Section 3.5, the amount of Stock which may be made subject to the Plan shall not
exceed [50,000] shares of the Company's authorized but unissued Stock.
1.4 ADMINISTRATION. The authority to manage and control the operation and
administration of the Plan shall be vested in the Corporate Governance Committee
of the Board (the "Committee"). Subject to the limitations of the Plan, the
Committee shall have the sole and complete authority: (a) to interpret the Plan
and to adopt, amend and rescind administrative guidelines and other rules and
regulations relating to the Plan; (b) to correct any defect or omission or to
reconcile any inconsistency in the Plan or in any payment made hereunder; and
(c) to make all other determinations and to take all other actions necessary or
advisable for the implementation and administration of the Plan. The
Committee's determinations on matters within its authority shall be conclusive
and binding upon the Company and all other persons. All expenses associated
with the Plan shall be borne by the Company.
1.5 DEFINITIONS. The definitions applicable to the Plan include the
following:
(a) "Attendance Fee" means the fee payable to a non-employee director
of the Company for attendance at a Board meeting or meeting of a Board committee
(whether for in person attendance or attendance by conference telephone) and
interest accrued on any deferral thereof as provided in Section 2.2 and, in
respect of a Prior Plan Participant, also includes any attendance fee the
payment of which has been duly deferred pursuant to the Directors' 1990 Deferred
Compensation Plan and interest accrued thereon pursuant to that plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Date of Purchase" shall mean January 2 or July 1, if a business
day on which the New York Stock Exchange is open for trading (or, if not, the
first such business day thereafter), as the terms of the Plan require.
(d) "Directors' 1990 Deferred Compensation Plan" means the plan
adopted by the Board on June 20, 1990, permitting any non-employee director of
the Company irrevocably to elect to defer receipt of all or part of his or her
future Retainer and/or Attendance Fees to a date certain following the
<PAGE>
time when such director ceases to serve as such or to some other specific future
date selected by such director, at which date the director (or, in the event of
death, a designated beneficiary) is entitled to receive in cash such deferred
compensation together with interest thereon during the period of deferral in an
amount equal to the prime rate quoted at the beginning of each calendar quarter
by Bankers Trust Company of New York.
(e) "Participant" means, as of any date, any director of the Company
or Prior Plan Participant who is not, on that date (and any Prior Plan
Participant who has never been), an employee of the Company or any corporation
in which more than 50% of the total combined voting power of all classes of
stock entitled to vote is owned, directly or indirectly, by the Company. For
purposes of Section 2, a Prior Plan Participant shall be deemed to be a
Participant in respect of amounts deferred under the Directors' 1990 Deferred
Compensation Plan only if he or she shall have elected under Section 2.3 hereof
to include such amounts in the Plan and for only so long as his or her
irrevocable election under the Directors' 1990 Deferred Compensation Plan
requires that such amounts not be delivered to the director (or a designated
beneficiary).
(f) "Prior Plan Participant" means any director of the Company on the
effective date of the Plan and any retired member of the Board who were he or
she still on the Board at the effective date would otherwise qualify as a
Participant hereunder, and who in either case has heretofore elected pursuant to
the Directors' 1990 Deferred Compensation Plan to defer some or all of his or
her Board compensation eligible for deferral thereunder and who will not be
entitled to receive (and whose designated beneficiary will not be entitled to
receive) any sums (including interest thereon) deferred under the Directors'
1990 Deferred Compensation Plan until a date later than April 30, 1995.
(g) "Retainer" means the annual fee payable in installments to a
non-employee director of the Company for service as a director, a chairperson of
a Board committee, or a member of the Executive Committee of the Board, and in
respect of a Prior Plan Participant includes any such fee the payment of which
has been duly deferred pursuant to the Directors' 1990 Deferred Compensation
Plan and interest accrued thereon pursuant to that plan.
(h) "Stock" means the $1.00 par value common stock of the Company.
1.6 COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other provision
of the Plan, the Company shall have no obligation to deliver any shares of Stock
under the Plan unless such delivery would comply with all applicable laws and
the applicable requirements of any securities exchange or similar entity on
which such class of Stock is admitted to trading or otherwise has trading
privileges. Prior to the delivery of any shares of Stock under the Plan, the
Company may require a written statement that the recipient is acquiring such
shares for investment and not for the purpose or with the intention of
distributing the shares. If the redistribution of shares of Stock is restricted
pursuant to this Section, the certificates representing such shares, when
issued, may bear a legend referring to such restriction.
SECTION 2. RECEIPT OF STOCK OR CASH; DEFERRAL
2.1 RIGHT TO RECEIVE STOCK OR CASH. Subject to the availability of shares
of Stock under the Plan, a member of the Board who is a Participant during any
part of a fiscal year of the Company (and any present or former member of the
Board who is a Prior Plan Participant) may elect pursuant to Section 2.3 to
defer the receipt of some or all of the Retainer (in multiples of 25%) and/or
100% of Attendance Fees and, in respect of an election to receive shares of
Stock, dividends paid on the Stock previously allocated to the Participant under
this Plan as provided in Section 2.2, plus (whether in respect of an election to
defer in the form of Stock or cash) accrued interest on cash deposited to his or
her account as calculated under said Section 2.2. To the extent an election is
made to defer for the purpose of purchase of Stock, the amounts deferred for
such purpose in each six month period beginning July 1 and January 1, as the
case may be (each six month period is hereafter referred to as a "Period"), and
interest accrued thereon during such Period, shall be used for the purchase of
Stock by the Company for the account of the
<PAGE>
Participant on the Date of Purchase next succeeding the end of the Period in
respect of which such deferrals were made. In addition, a Prior Plan
Participant may make a one-time election as provided in Section 2.3 to continue
to defer in the form of cash and/or Stock, for the remainder of the previously
elected period of deferral in respect of the amounts deferred pursuant to the
Directors' 1990 Deferred Compensation Plan (including interest accrued
thereon). In the event a Prior Plan Participant makes an election pursuant to
Section 2.3 to defer in the form of Stock, then sums deferred under the
Directors' 1990 Deferred Compensation Plan and elected to be rolled into the
Plan for such purpose shall be used for the purchase of Stock on January 3,
1995. Should a Prior Plan Participant not make the one-time election
permitted hereunder or elect to continue to defer hereunder in the form of
cash some or all of the amounts deferred under the Directors' 1990 Deferred
Compensation Plan, all amounts not deferred in the form of Stock hereunder
shall constitute a cash deferral under the Plan as of the close of business on
the date the vote of shareholders at the 1994 Annual Meeting shall be
certified by the inspectors of election.
2.2 EQUIVALENT AMOUNT OF STOCK. The number of shares of Stock to be
allocated for a Period to any Participant, calculated as of the Date of Purchase
next succeeding the end of such Period utilizing sums accrued to the account of
such Participant in respect of such Period by reason of the Participant's
election under Section 2.3 to defer in the form of Stock, shall be equal to:
(a) the aggregate amount of the Retainer, Attendance Fees and
dividends paid on the Stock in respect of the Period to the extent the
Participant elected to defer receipt of such amounts for such Period, plus
interest accrued on the Retainer, Attendance Fees and dividends from and
after the date when, but for the deferral hereunder, such amounts would be
otherwise payable to the director (I.E., the last business day of each
month in respect of the Retainer, the last business day of the month when
the meeting or meetings in respect of which the Attendance Fee is payable
was held and the payment date for any dividend declared on the Stock
previously allocated to the Participant under the Plan receipt of which
remains deferred pursuant to the Participant's election under Section 2.3)
at a rate equal to the average of the prime rates charged by Bankers Trust
Company of New York on the first day of each month of the Period (in
respect of any Prior Plan Participant who shall have made the one-time
election permitted under Section 2.3 (as contemplated by Section 2.1) the
amount under this clause (a) shall also include the amount rolled into the
Plan from the Directors' 1990 Deferred Compensation Plan);
DIVIDED BY
(b) the Fair Market Value of a share of Stock at the close of
business on the day preceding the Date of Purchase.
For this purpose, "Fair Market Value" as of any date means (i) the closing price
(or, if not less than 31 days before a Date of Purchase the Committee so
determines, the average of all closing prices during the 30 days preceding such
Date of Purchase) for sales of Stock as reported on the Composite Transaction
Reporting System on the New York Stock Exchange, which includes other
participating exchanges and over the counter markets, on such date (or dates);
or (ii) in the absence of a reported sale for such date (or dates), the average
of the reported closing bid and asked prices for a share of Stock on such
Exchange. Any fractional share of Stock remaining at the time of actual
delivery of the Stock to the Participant in accordance with the terms of the
Plan shall be distributed to the Participant in cash.
2.3 DEFERRAL ELECTION. (a) In lieu of receiving cash on the date the
Retainer, Attendance Fee or dividend would otherwise have been received (and in
respect of Prior Plan Participants when cash amounts previously irrevocably
deferred under the Directors' 1990 Deferred Compensation Plan would otherwise be
delivered to him or her), the Participant can elect to receive Stock, and the
dividends paid on such Stock, if any, or cash, on a deferred basis for any
period of such Participant's election, subject in respect of elections by Prior
Plan Participants in respect of amounts deferred under the Directors' 1990
Compensation Plan to the last sentence of clause (a) of this Section 2.3. An
election under this Section 2.3 shall be valid only if it is in a writing on a
notice of election that complies with the requirements of
<PAGE>
clause (b) of this Section 2.3, is signed by the Participant, and, subject to
and except as provided in the last sentence of this clause (a), is filed with
the Company prior to the first day of any calendar year in respect of which the
election is to apply (except that in respect of any election to defer amounts
payable during the six months period beginning July 1, 1994, the notice of
election shall be filed not later than June 30, 1994). Any such election shall
be irrevocable with respect to the calendar year (or initial Plan Period) to
which it relates and cannot be changed on and after the date of such election
with respect to such calendar year (or initial Plan Period). Once effective,
such election (except for the one-time irrevocable election permitted hereunder
in respect of amounts deferred under the Directors' 1990 Compensation Plan)
shall remain in effect for successive calendar years until it is revised or
revoked. Any changes to such election applicable to a succeeding calendar year
must be filed with the Company prior to the first day of the calendar year for
which it is to apply. The election shall be subject to such other terms and
conditions established from time to time by the Committee. The first permitted
election hereunder for non-employee directors then serving as members of the
Board, and the only permitted election hereunder by Prior Plan Participants in
respect of amounts deferred under the Directors' 1990 Deferred Compensation
Plan, subject in every case to shareholder approval of the Plan, shall be made
not later than June 30, 1994.
(b) In accordance with the terms of the Plan, the Participant (and,
in the case of clause (v) below, the Prior Plan Participant) shall indicate on
the notice of election whether and to what extent, but only in multiples of 50%,
the deferral is to be in the form of cash or Stock and:
(i) whether the Participant wishes to defer 100% of Attendance Fees
(or no Attendance Fees) and the percentages of the Retainer (in multiples
of 25%) and/or (in respect of Stock) dividends thereon he or she wishes to
defer, if any;
(ii) the date to which the deferral shall extend;
(iii) whether (subject to the extent, if any, the Committee permits)
distributions are to be in a single lump sum or in multiple (but not
exceeding 10) installments;
(iv) the Participant's designated beneficiary or beneficiaries in
the event of his or her death; and
(v) the extent to which any part of the cash deferred under the
Directors' 1990 Deferred Compensation Plan shall be used to purchase Stock.
(c) If a Participant dies before receiving all payments to which he
or she is entitled under the Plan, payment shall be made on January 15 (or the
next succeeding business day if January 15 is not a business day) of the
calendar year following the date of death in accordance with the Participant's
designation of a beneficiary on a form provided for that purpose and delivered
to and accepted by the Committee or, in the absence of a valid designation or if
the designated beneficiary does not survive the Participant, to such
Participant's estate.
2.4 DIVIDENDS; VOTING. If the Participant elects not to defer receipt of
dividends on Stock previously allocated, dividends on such Stock will be paid
directly to the Participant as, if and when paid by the Company. If the
Participant elects to defer receipt of the Stock, the Participant shall
nevertheless have the right to vote the Stock purchased for the account of the
Participant on any matters on which all other shareholders are otherwise
entitled to vote.
2.5 SECURITIES LAW COMPLIANCE. Participation in the Plan in respect of
deferrals in the form of Stock will be governed by, in addition to general
corporate law (which shall apply irrespective of the form of the deferral), the
rules and regulations promulgated by the Securities and Exchange Commission, in
particular, Section 16 of the Securities Exchange Act of 1934. It is the intent
of the Company that the Plan satisfy, and be interpreted in a manner that
satisfies the applicable requirements of Rule 16b-3 of the
<PAGE>
Securities Exchange Act of 1934, so that Participants will be entitled to the
benefits of Rule 16b-3, or other exemptive rules under Section 16 of the
Securities Exchange Act of 1934, and will not be subjected to avoidable
liability thereunder. If any provision of the Plan would otherwise frustrate or
conflict with the intent expressed in this Section 2.5, that provision to the
extent possible shall be interpreted and deemed amended so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provisions shall be deemed void.
SECTION 3. MISCELLANEOUS
3.1 AMENDMENT AND TERMINATION OF PLAN. While the Company expects and
intends to continue the Plan, the Board reserves the right at any time and in
any way to amend, suspend or terminate the Plan, PROVIDED, HOWEVER, that the
Board may not, without further approval by the shareholders of the Company,
materially increase the number of shares of Stock which are subject to the Plan,
materially modify the requirements for eligibility as a Participant under the
Plan or materially increase the benefits accruing to Participants under the
Plan. Notwithstanding the immediately preceding sentence, to the extent that,
in the opinion of counsel to the Company, stockholder approval of an amendment
to the Plan is not required under the Securities Exchange Act of 1934 (including
the rules and regulations promulgated thereunder) in order for the Plan to
continue to satisfy the applicable requirements for exemption from the operation
of Section 16(b) of the Securities Exchange Act of 1934, such amendment may be
made by the Board acting alone. No amendment of the Plan shall without such
Participant's written consent, except as permitted by Section 2.5, materially
and adversely affect any right of any Participant with respect to any deferral
election theretofore made under the Plan or any right of a Prior Plan
Participant in respect of amounts deferred thereunder.
3.2 APPLICABLE LAW. The Plan shall be construed and administered in
accordance with the laws of the State of New York.
3.3 DIRECTOR STATUS. The Plan will not give any Participant the right to
continue as a director of the Company, or any right or claim to any benefit
under the Plan unless such right or claim has specifically accrued under the
terms of the Plan.
3.4 GENDER AND NUMBER. Where the context requires, words in any gender
shall include any other gender, words in the singular shall include the plural
and words in the plural shall include the singular.
3.5 ADJUSTMENTS FOR CERTAIN CHANGES IN CAPITALIZATION. If the Company
shall at any time increase or decrease the number of its outstanding shares of
Stock or change in any way the rights and privileges of such shares by means of
the payment of a stock dividend or any other distribution upon such shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification, or recapitalization involving the Stock, then the
numbers, rights, and privileges of the shares issuable under the Plan shall be
increased, decreased, or changed in like manner as if such shares had been
issued and outstanding, fully paid, and nonassessable at the time of such
occurrence.
3.6 NONASSIGNABILITY. No right to receive payments under the Plan nor any
shares of Stock allocated to a Participant shall be assignable or transferable
by a Participant other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, Title I of the Employee Retirement Income
Security Act of 1974, as amended, or rules thereunder. The designation of a
beneficiary by a Participant pursuant to Section 2.3(b) does not constitute a
transfer.
3.7 UNSECURED OBLIGATION. Amounts deferred under this Plan, unless and
until used to purchase Stock, shall be an unsecured obligation of the Company.
<PAGE>
Exhibit 10.30
MALLINCKRODT GROUP INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
(EFFECTIVE JULY 1, 1994)
Section 1. PURPOSE. The purpose of the Mallinckrodt Group Inc. Long-Term
Incentive Compensation Plan (the "Plan") is to further the long-term growth and
profitability of Mallinckrodt Group Inc. (the "Corporation") by offering long-
term incentives in addition to current compensation to officers and other key
management of the Corporation and its subsidiaries (each, a "Subsidiary"), and
to provide such participating employees with an equity position in the
Corporation to further align their interests with those of the shareholders of
the Corporation. The Plan is intended to provide an incentive compensation
opportunity to participating employees of the Corporation and its Subsidiaries
which is not subject to the limitation on deductions for federal income tax
purposes contained in Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), and should be construed to the extent possible as
providing for remuneration which is "performance-based compensation" within the
meaning of Section 162(m) of the Code and Treasury Regulations thereunder.
Section 2. ADMINISTRATION; SHAREHOLDER RATIFICATION.
(a) The Plan shall be administered by the Organization and
Compensation Committee (the "Committee") of the Board of Directors of the
Corporation (the "Board"). The Committee is authorized, subject to the
provisions of the Plan, from time to time to establish such rules and
regulations and make such interpretations and determinations as it may deem
necessary or advisable for the proper administration of the Plan, and all rules,
regulations, interpretations and determinations shall be binding on all
participants (as defined below).
(b) With respect to each Performance Cycle, the class of eligible
participants pursuant to Section 3, the objective performance goals specified
pursuant to Section 5, and the maximum award payable to any participant under
Section 4, must be disclosed to and approved by the Corporation's shareholders.
Section 3. PARTICIPATION. Employees eligible to participate in the Plan
shall consist of officers and other key management employees of the Corporation
and its Subsidiaries who, in the opinion of the Committee, have significant
potential for making substantial contributions to the success of the Corporation
and its Subsidiaries. The Committee shall, at the beginning of each Performance
Cycle (as defined below), determine, except as otherwise contemplated by the
last sentence of Section 4, which of such officers and other key management
employees shall participate in the Plan ("Participants") and the terms and
conditions of such participation. The Committee shall report to the Board the
names, classes (grades), or titles of the eligible Participants and, in general,
the terms and conditions applicable to their participation with respect to a
Performance Cycle. All employees designated as Participants shall be promptly
advised of their participation.
<PAGE>
Section 4. LONG-TERM INCENTIVE AWARDS. Each designated Participant who is
actively employed by the Corporation or a Subsidiary on the last day of a
Performance Cycle is eligible to receive a long-term incentive award under this
Plan based upon the attainment of objective performance goals established by the
Committee for the Performance Cycle under Section 5 hereof. A Participant must
be actively employed by the Corporation or a Subsidiary thereof on the last day
of a Performance Cycle to receive an incentive award for such Performance
Cycle. However, if a Participant's employment is terminated prior to the last
day of a Performance Cycle by reason of the Participant's death, disability or
Qualified Retirement, the Participant (or Participant's designated beneficiary
in the event of his or her death), at the sole discretion of the Committee,
shall be entitled to receive an amount determined by multiplying the incentive
award which would have been payable had the Participant remained an employee
through the last day of the Performance Cycle by a fraction, the numerator of
which is the number of days during the Performance Cycle the Participant was
employed by the Corporation or one of its Subsidiaries, and the denominator of
which is 1,080. For purposes of this Plan, Qualified Retirement means
retirement at or after age 55 except that Qualified Retirement shall not
include a termination of the Participant's employment by the Corporation for
Cause. If a Participant's employment with the Corporation or one of its
Subsidiaries begins after the first day of a Performance Cycle, the
Participant's incentive award for such Performance Cycle shall automatically
be pro-rated utilizing the formula set forth in the preceding sentence.
Section 5. PERFORMANCE CYCLE; PERFORMANCE GOALS.
(a) For purposes of this Plan, a Performance Cycle shall be a period
of three (3) consecutive fiscal years of the Corporation. Prior to the
beginning of each Performance Cycle, the Committee will establish, in writing,
the objective performance goals applicable to each Participant or class of
Participants for the Performance Cycle. The objective performance goals
established by the Committee may be expressed in terms of financial, operating
or other criteria, or any combination thereof, and may involve comparisons with
respect to historical results of the Corporation and its Subsidiaries and
operating groups or segments thereof, all as the Committee deems appropriate to
achieve the purposes of the Plan as set forth in Section 1 hereof. However,
each objective performance goal must be based upon or measured by criteria which
would permit a third party, having knowledge of the relevant facts, to determine
whether the objective performance goal was satisfied and calculate the amount of
the award payable to a Participant.
(b) The objective performance goals established by the Committee must
preclude the discretion to increase the amount of any award payable to a
Participant. However, to the extent permitted under Code Section 162(m) and the
Treasury Regulations thereunder, the Committee retains the discretion to
eliminate or decrease the amount of any award otherwise payable to a
Participant. Notwithstanding any other provision in this Plan, neither any
discretion given to the Committee with respect to Participants' incentive
awards,
-2-
<PAGE>
or the amount payable thereunder, nor any rights given to the Committee, if any,
to adjust criteria or goals relating to an incentive award, may be exercised
after a Change in Control which in any way adversely affects the amount of an
incentive award for the Performance Cycle in which the Change in Control
occurred (or for the immediately preceding Performance Cycle, if payment with
respect thereto has not been made before the Change in Control occurs), or any
Participant's rights with respect to either such Performance Cycle.
Section 6. PAYMENTS. Amounts payable under the Plan shall be paid to
Participants as soon as practicable after the end of each Performance Cycle.
Amounts payable under this Plan shall be paid by the Corporation as follows:
50% of a Participant's incentive award shall be paid in cash, and 50% of a
Participant's incentive award shall be paid by the delivery of that number of
shares of the Corporation's common stock, par value $1.00 per share, determined
by dividing (i) 50% of the Participant's incentive award by (ii) the average of
the means between the highest and lowest prices of the Corporation's common
stock for each of the fifteen business days preceding the last day of the
Performance Cycle, as reflected in the Composite Tape for New York Stock
Exchange issues. Notwithstanding any other provision of this Plan to the
contrary, any shares of common stock to be delivered under this Section 6 to any
Section 16 reporting persons shall by their terms not be transferable for a
period of six (6) months from the date of issuance thereof; provided however,
that the six (6) month limitation on transferability shall not extend to any
shares delivered to any Participant following a Change in Control of the
Corporation.
Section 7. CHANGE IN CONTROL.
(a) Notwithstanding Section 4 hereof, in the event a Participant's
employment with the Corporation is terminated following a Change in Control of
the Corporation by reason of (i) a termination by the Corporation without Cause
or (ii) a termination by the Participant with Good Reason, then the Participant
shall receive the amount which the Participant would have received had the
Participant remained an employee of the Corporation or one of its Subsidiaries
through the last day of the Performance Cycle in which the Change in Control
occurred, with such incentive award to be based on the actual results at the end
of the Performance Cycle.
(b) For purposes of this Plan, a "Change in Control" of the
Corporation shall mean, and be deemed to have occurred, on the date of the first
to occur of any of the following:
(i) there occurs a Change in Control of the Corporation of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A or Item 1 of Form 8-K, promulgated under the
Securities Exchange Act of 1934 (the "Act") as in effect as of the first
day of a Performance Cycle or, if neither item remains in effect, any
regulations issued under the Act which serve similar purposes;
-3-
<PAGE>
(ii) any "person" (as such term is under in Sections 13(d) and
14(d)(2) of the Act) is or becomes a beneficial owner, directly or
indirectly, of securities of the Corporation owning 20% or more of the
combined voting power of the Corporation's then outstanding securities,
provided however that the event described in this Section 7(b)(ii) shall
not be deemed to have occurred by virtue of ownership of any securities of
the Corporation by the Corporation or by any employee benefit plan
sponsored or maintained by the Corporation;
(iii) individuals who, as of the first day of a Performance Cycle,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, PROVIDED HOWEVER that (1) any
person becoming a director subsequent to the first day of a Performance
Cycle whose election, or nomination for election, by the Corporation's
shareholders, was approved by a vote of at least 70% of the directors
comprising the Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Corporation in which such person is named as a
nominee for director, without objection to such nomination) shall be, for
purposes of this paragraph (iii), considered as though such person were a
member of the Incumbent Board, and (2) in the event that after the first
day of a Performance Cycle, the Board by a vote of at least 70% of the
directors comprising the Incumbent Board shall have reduced or enlarged the
size of the Board of Directors or recommended to shareholders such a
reduction or enlargement, upon such reduction or enlargement having
occurred, the Board of Directors as so reduced or enlarged shall thereupon
constitute the Incumbent Board for all purposes including, without
limitation, for the purpose of determining what thereafter constitutes the
majority or 70% specified above;
(iv) the Corporation shall have merged into or consolidated with
another corporation, or merged another corporation into the Corporation, on
a basis whereby less than 50% of the total voting power of the surviving
corporation is represented by shares held by shareholders of the
Corporation prior to such merger or consolidation; or
(v) the Corporation shall have sold all, or as determined by the
Board, substantially all of its assets to another corporation or other
entity or person.
(c) For purposes of this Section 7 and Section 4, the term "Cause"
means (i) the willful and continued failure of a Participant to perform his or
her duties with the Corporation (other than any failure due to physical or
mental incapacity) after a demand for substantial performance is delivered to
the Participant by the Board which specifically identifies the manner in which
the Board believes the Participant has not substantially performed his or her
duties, or (ii) willful misconduct materially and demonstrably injurious to the
Corporation. No act or failure to act by the Participant shall be considered
"willful" unless done or omitted to be done by the Participant not in good faith
and without reasonable
-4-
<PAGE>
belief that such action or omission was in the best interest of the
Corporation. The unwillingness of the Participant to accept any or all of a
change in nature or scope of his or her position, authorities or duties, a
reduction in his or her total compensation or benefits, a relocation that the
Participant deems unreasonable in light of his or her personal circumstances,
or other action by or request of the Corporation in respect of his or her
position, authority, or responsibility that the Participant reasonably deems
to be contrary to this Plan, may not be considered by the Board to be a
failure to perform or misconduct by the Participant. Notwithstanding the
foregoing, no Participant shall be treated as having been terminated for Cause
for purposes of this Plan unless and until there shall have been delivered to
the Participant a copy of a resolution, duly adopted by a vote of 70% of the
entire Board of Directors of the Corporation at a meeting of the Board called
and held (after reasonable notice to the Participant and an opportunity for
the Participant and his or her counsel to be heard before the Board) for the
purpose of considering whether the Participant has been guilty of such a
willful failure to perform or such willful misconduct as justifies termination
for Cause hereunder, finding that in the good faith opinion of the Board the
Participant has been guilty thereof and specifying the particulars thereof.
(d) For purposes of this Section 7, a termination by the Participant
will be with "Good Reason" if the resignation of the Participant is for any one
or more of the following:
(i) the Participant's resignation or retirement is requested by the
Corporation other than for Cause;
(ii) any significant change in the nature or scope of the
Participant's position, authorities or duties from those existing as of the
first day of the Performance Cycle;
(iii) any reduction in the Participant's total compensation or
benefits from those existing as of the first day of the Performance Cycle;
(iv) the breach by the Corporation of any provision of this Plan or
any other agreement between the Corporation and the Participant; or
(v) the reasonable determination by the Participant that, as a result
of a Change in Control of the Corporation and a change in circumstances
thereafter significantly affecting his or her position, the Participant is
unable to exercise the authorities and responsibilities attached to his or
her position as such authorities and responsibilities exist as of the first
day of the Performance Cycle.
Section 8. MISCELLANEOUS.
(a) DESIGNATED BENEFICIARY. If a Participant shall die before
receipt of all distributions or payments to which he or she is entitled under
the Plan, distribution or
-5-
<PAGE>
payment of the amount to which he or she is entitled shall be made to such
beneficiary as the Participant shall have designated by an instrument in writing
filed with the Vice President-Human Resources of the Corporation or, in the
absence of such designation, to the Participant's personal representative.
(b) ASSETS. No assets shall be segregated or earmarked in respect of
this Plan and no Participant shall have any right to assign, transfer, pledge or
hypothecate his or her interest in the Plan. All amounts payable pursuant to
the terms of this Plan shall be paid from the general assets of the Corporation.
(c) SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan an aggregate of one million (1,000,000) shares of Common
Stock, which may be authorized but unissued or treasury shares.
(d) LIABILITY. No member of the Board shall be liable for any act or
action hereunder, whether of omission or commission, by any other member or
employee or by any agent to whom duties in connection with the administration of
the Plan have been delegated or, except in circumstances involving such member's
bad faith, gross negligence or fraud, for anything done or omitted to be done by
such member. The Corporation will fully indemnify and hold each member of the
Board harmless from any liability hereunder, except in circumstances involving
such member's bad faith, gross negligence or fraud. The Corporation or the
Board may consult with legal counsel, who may be counsel for the Corporation,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
(e) AMENDMENT OR TERMINATION. Notwithstanding any other provision of
this Plan, the Board may at any time, and from time to time, amend, in whole or
in part, any or all of the provisions of the Plan, or suspend or terminate it
entirely, retroactively or otherwise; provided, however that any such amendment,
suspension or termination may not, without the Participant's consent, adversely
affect any incentive awards previously made prior to the effective date of such
amendment, suspension or termination. Notwithstanding the preceding sentence,
no amendment of the Plan shall, without approval of the stockholders of the
Corporation, result in the Plan losing its status as a protected plan under
Securities and Exchange Commission Rule 16b-3 to the extent applicable.
(f) EXPENSES. The Corporation will bear all expenses incurred by it
in administering this Plan.
(g) WITHHOLDING. The Corporation shall have the right to deduct from
any payment to be made pursuant to this Plan or to otherwise require prior to
the payment of any amount hereunder or the delivery of shares hereunder, payment
by the Participant of any Federal, state or local taxes required by law to be
withheld.
-6-
<PAGE>
(h) NO OBLIGATION. Subject to Section 8(e) hereof, neither this Plan
nor any awards made hereunder shall create any obligation on the part of the
Corporation or any Subsidiary to continue this Plan, or any other existing award
plans or policies or to establish or continue any other programs, plans or
policies of any kind. Neither this Plan nor any award made pursuant to this
Plan shall give any Participant or other employee any right with respect to
continuance of employment by the Corporation or any of its Subsidiaries or
affiliates or of any specific aggregate amount of compensation, nor shall there
be a limitation in any way on the right of the Corporation or any of its
Subsidiaries or affiliates by which an employee is employed to terminate such
employee at any time for any reason whatsoever, nor shall this Plan nor any
award made hereunder create a contract of employment.
(i) NO ASSIGNMENT; RESOLUTION OF DISPUTES. Except as otherwise
permitted under Section 8(a), no right or interest of any Participant in this
Plan shall be assignable or transferable, and no right or interest of any
Participant hereunder shall be subject to any lien, obligation or liability of
such Participant. In the event any conflicting demands are made upon the
Corporation with respect to any payments due as a result of this Plan, provided
that the Corporation shall not have received prior written notice that said
conflicting demands have been finally settled by court adjudication,
arbitration, joint order or otherwise, the Corporation may pay to the
Participant any and all amounts due hereunder, and thereupon the Corporation
shall stand fully relieved and discharged of any further duties or liabilities
under this Plan.
(j) SUCCESSORS. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization which shall
succeed to substantially all of the assets and business of the Corporation and
the term "Corporation," wherever used in this Plan, shall include any such
corporation or organization after such succession.
(k) GOVERNING LAW. This Plan and all actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of New York (regardless of the law that might otherwise govern under
applicable New York principles of conflict of laws).
(l) SHAREHOLDER APPROVAL. The Plan was adopted by the Board on June
15, 1994. The Plan and any incentive awards granted hereunder shall be null and
void if stockholder approval of the Plan is not obtained within twelve (12)
months of the adoption of the Plan by the Board.
-7-
<PAGE>
<PAGE>
Exhibit 11.1
EARNINGS PER SHARE
PRIMARY COMPUTATION
Years ended June 30, 1992, 1993, and 1994
($ in millions except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basis for computation of earnings per
common and common equivalent shares:
Earnings (loss) from continuing operations $107.4 $(113.8) $128.8
Dividends on 4% cumulative preferred stock (.4) (.4) (.4)
---------- ---------- ----------
Earnings from continuing operations
available to common shareholders 107.0 (114.2) 128.4
Discontinued operations (3.6) (6.0) (1.3)
Cumulative effects of accounting changes (80.6)
---------- ---------- ----------
Net earnings (loss) available
to common shareholders $103.4 $(200.8) $127.1
---------- ---------- ----------
---------- ---------- ----------
Number of common and common equivalent shares:
Weighted average shares outstanding 76,809,532 76,269,208 75,983,906
Shares issuable upon exercise of stock options,
net of shares assumed to be repurchased 797,884 1,139,460 1,817,567
---------- ---------- ----------
77,607,416 77,408,668 77,801,473
---------- ---------- ----------
---------- ---------- ----------
Earnings (loss) per common and common
equivalent share:
Continuing operations $1.38 $(1.48) $1.65
Discontinued operations (.05) (.08) (.02)
Accounting changes (1.04)
--------- --------- ---------
Net earnings (loss) $1.33 $(2.60) $1.63
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
Exhibit 11.2
EARNINGS PER SHARE
FULLY DILUTED COMPUTATION
Years ended June 30, 1992, 1993, and 1994
($ in millions except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basis for computation of earnings per
common and common equivalent shares:
Earnings (loss) from continuing operations $107.4 $(113.8) $128.8
Dividends on 4% cumulative preferred stock (.4) (.4) (.4)
---------- ---------- ----------
Earnings from continuing operations
available to common shareholders 107.0 (114.2) 128.4
Discontinued operations (3.6) (6.0) (1.3)
Cumulative effects of accounting changes (80.6)
---------- ---------- ----------
Net earnings (loss) available
to common shareholders $103.4 $(200.8) $127.1
---------- ---------- ----------
---------- ---------- ----------
Number of common and common equivalent shares:
Weighted average shares outstanding 76,809,532 76,269,208 75,983,906
Shares issuable upon exercise of stock options,
net of shares assumed to be repurchased 882,368 1,139,460 1,880,014
---------- ---------- ----------
77,691,900 77,408,668 77,863,920
---------- ---------- ----------
---------- ---------- ----------
Earnings (loss) per common and common
equivalent share:
Continuing operations $1.38 $(1.48) $1.65
Discontinued operations (.05) (.08) (.02)
Accounting changes (1.04)
---------- ---------- ----------
Net earnings (loss) $1.33 $(2.60) $1.63
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Year ended June 30, 1994
Certain of Mallinckrodt's subsidiaries at June 30, 1994 are listed below.
Collectively these subsidiaries, together with Mallinckrodt, account for more
than 90 percent of consolidated net sales, earnings before income taxes from
continuing operations, and total assets.
<TABLE>
<CAPTION>
Jurisdiction of Percent
Incorporation Ownership
- ----------------------------------------------------------------------
<S> <C> <C>
Carnforth Ltd. Bermuda 100%
Mallinckrodt Holdings (U.S.A.), Inc. Delaware 100%
Mallinckrodt, Inc. Delaware 100%
Mallinckrodt Chemical, Inc. Delaware 100%
Mallinckrodt Medical, Inc. Delaware 100%
Fries & Fries, Inc. Delaware 100%
Mallinckrodt Veterinary, Inc. Delaware 100%
Pitman-Moore International, Inc. Delaware 100%
- ----------------------------------------------------------------------
</TABLE>
A number of small subsidiaries are not shown. Individually, and in the
aggregate, they do not constitute a significant subsidiary.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following registration
statements and related prospectuses filed by Mallinckrodt Group Inc. under the
Securities Act of 1933 of our report dated August 9, 1994 with respect to the
consolidated financial statements and schedules of Mallinckrodt Group Inc.
included in this Annual Report on Form 10-K for the year ended June 30, 1994:
Commission File No.
Form S-8, No. 2 - 65727
Form S-8, No. 2 - 72455
Form S-8, No. 2 - 70868
Form S-8, No. 2 - 90910
Form S-8, No. 2 - 94151
Form S-8, No. 33 - 10381
Form S-8, No. 33 - 32109
Form S-8, No 33 - 40246
Form S-8, No 33 - 43925
Form S-3, No. 2 - 96566
Form S-3, No. 33 - 39837
Form S-3, No. 33 - 47081
ERNST & YOUNG LLP
------------------
Ernst & Young LLP
St. Louis, Missouri
September 23, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1993
<PERIOD-END> JUN-30-1994
<CASH> 88
<SECURITIES> 0
<RECEIVABLES> 355
<ALLOWANCES> 11
<INVENTORY> 377
<CURRENT-ASSETS> 932
<PP&E> 1,396
<DEPRECIATION> 533
<TOTAL-ASSETS> 2,434
<CURRENT-LIABILITIES> 671
<BONDS> 522
<COMMON> 87
0
11
<OTHER-SE> 918
<TOTAL-LIABILITY-AND-EQUITY> 2,434
<SALES> 1,940
<TOTAL-REVENUES> 1,940
<CGS> 1,037
<TOTAL-COSTS> 1,747
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 171
<INCOME-TAX> 64
<INCOME-CONTINUING> 107
<DISCONTINUED> (4)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 0
</TABLE>
